Correlation Between Merck and IShares Russell
Can any of the company-specific risk be diversified away by investing in both Merck and IShares Russell at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Merck and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and iShares Russell Mid Cap, you can compare the effects of market volatilities on Merck and IShares Russell and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Merck with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and IShares Russell.
Diversification Opportunities for Merck and IShares Russell
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and IShares is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and iShares Russell Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Mid and Merck is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Merck Company are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Mid has no effect on the direction of Merck i.e., Merck and IShares Russell go up and down completely randomly.
Pair Corralation between Merck and IShares Russell
Considering the 90-day investment horizon Merck Company is expected to under-perform the IShares Russell. In addition to that, Merck is 2.26 times more volatile than iShares Russell Mid Cap. It trades about -0.35 of its total potential returns per unit of risk. iShares Russell Mid Cap is currently generating about 0.23 per unit of volatility. If you would invest 13,230 in iShares Russell Mid Cap on November 18, 2024 and sell it today you would earn a total of 628.00 from holding iShares Russell Mid Cap or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. iShares Russell Mid Cap
Performance |
| Timeline |
| Merck Company |
| iShares Russell Mid |
Merck and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and IShares Russell
The main advantage of trading using opposite Merck and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, IShares Russell can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Russell will offset losses from the drop in IShares Russell's long position.The idea behind Merck Company and iShares Russell Mid Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Russell vs. JPMorgan Fundamental Data | IShares Russell vs. Vanguard Mid Cap Index | IShares Russell vs. SPDR SP 400 | IShares Russell vs. SPDR SP 400 |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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