Correlation Between Merck and JPMorgan Global
Can any of the company-specific risk be diversified away by investing in both Merck and JPMorgan Global 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 JPMorgan Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and JPMorgan Global Select, you can compare the effects of market volatilities on Merck and JPMorgan Global 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 JPMorgan Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and JPMorgan Global.
Diversification Opportunities for Merck and JPMorgan Global
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and JPMorgan is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and JPMorgan Global Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Global Select 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 JPMorgan Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Global Select has no effect on the direction of Merck i.e., Merck and JPMorgan Global go up and down completely randomly.
Pair Corralation between Merck and JPMorgan Global
Considering the 90-day investment horizon Merck Company is expected to under-perform the JPMorgan Global. In addition to that, Merck is 2.09 times more volatile than JPMorgan Global Select. It trades about -0.02 of its total potential returns per unit of risk. JPMorgan Global Select is currently generating about 0.25 per unit of volatility. If you would invest 6,143 in JPMorgan Global Select on September 1, 2024 and sell it today you would earn a total of 211.00 from holding JPMorgan Global Select or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. JPMorgan Global Select
Performance |
| Timeline |
| Merck Company |
| JPMorgan Global Select |
Merck and JPMorgan Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and JPMorgan Global
The main advantage of trading using opposite Merck and JPMorgan Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, JPMorgan Global 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 JPMorgan Global will offset losses from the drop in JPMorgan Global's long position.The idea behind Merck Company and JPMorgan Global Select 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.| JPMorgan Global vs. FT Vest Equity | JPMorgan Global vs. Northern Lights | JPMorgan Global vs. Dimensional International High | JPMorgan Global vs. Matthews China Discovery |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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