Correlation Between Merck and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both Merck and Liberty Broadband 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 Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Liberty Broadband, you can compare the effects of market volatilities on Merck and Liberty Broadband 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 Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Liberty Broadband.
Diversification Opportunities for Merck and Liberty Broadband
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Liberty is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband has no effect on the direction of Merck i.e., Merck and Liberty Broadband go up and down completely randomly.
Pair Corralation between Merck and Liberty Broadband
Considering the 90-day investment horizon Merck Company is expected to generate 0.71 times more return on investment than Liberty Broadband. However, Merck Company is 1.41 times less risky than Liberty Broadband. It trades about 0.16 of its potential returns per unit of risk. Liberty Broadband is currently generating about -0.22 per unit of risk. If you would invest 9,579 in Merck Company on September 19, 2024 and sell it today you would earn a total of 427.00 from holding Merck Company or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Liberty Broadband
Performance |
| Timeline |
| Merck Company |
| Liberty Broadband |
Merck and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Liberty Broadband
The main advantage of trading using opposite Merck and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Liberty Broadband 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 Liberty Broadband will offset losses from the drop in Liberty Broadband's long position.| Merck vs. Emergent Biosolutions | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries | Merck vs. Haleon plc |
| Liberty Broadband vs. Boston Beer | Liberty Broadband vs. Willamette Valley Vineyards | Liberty Broadband vs. Sphere Entertainment Co | Liberty Broadband vs. Pinterest |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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