Correlation Between Merck and JPMorgan USD
Can any of the company-specific risk be diversified away by investing in both Merck and JPMorgan USD 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 USD 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 USD Emerging, you can compare the effects of market volatilities on Merck and JPMorgan USD 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 USD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and JPMorgan USD.
Diversification Opportunities for Merck and JPMorgan USD
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and JPMorgan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and JPMorgan USD Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan USD Emerging 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 USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan USD Emerging has no effect on the direction of Merck i.e., Merck and JPMorgan USD go up and down completely randomly.
Pair Corralation between Merck and JPMorgan USD
Considering the 90-day investment horizon Merck Company is expected to under-perform the JPMorgan USD. In addition to that, Merck is 3.92 times more volatile than JPMorgan USD Emerging. It trades about -0.11 of its total potential returns per unit of risk. JPMorgan USD Emerging is currently generating about 0.09 per unit of volatility. If you would invest 3,783 in JPMorgan USD Emerging on September 1, 2024 and sell it today you would earn a total of 165.00 from holding JPMorgan USD Emerging or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Merck Company vs. JPMorgan USD Emerging
Performance |
| Timeline |
| Merck Company |
| JPMorgan USD Emerging |
Merck and JPMorgan USD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and JPMorgan USD
The main advantage of trading using opposite Merck and JPMorgan USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, JPMorgan USD 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 USD will offset losses from the drop in JPMorgan USD's long position.The idea behind Merck Company and JPMorgan USD Emerging 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 USD vs. SPDR Bloomberg Emerging | JPMorgan USD vs. SPDR Bloomberg Barclays | JPMorgan USD vs. VanEck JP Morgan | JPMorgan USD vs. SPDR Bloomberg International |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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