Correlation Between Merck and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Merck and Lowes Companies 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 Lowes Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Lowes Companies, you can compare the effects of market volatilities on Merck and Lowes Companies 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 Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Lowes Companies.
Diversification Opportunities for Merck and Lowes Companies
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Lowes is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies 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 Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Merck i.e., Merck and Lowes Companies go up and down completely randomly.
Pair Corralation between Merck and Lowes Companies
Considering the 90-day investment horizon Merck is expected to generate 69.7 times less return on investment than Lowes Companies. But when comparing it to its historical volatility, Merck Company is 1.15 times less risky than Lowes Companies. It trades about 0.0 of its potential returns per unit of risk. Lowes Companies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 20,303 in Lowes Companies on September 3, 2024 and sell it today you would earn a total of 6,940 from holding Lowes Companies or generate 34.18% 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. Lowes Companies
Performance |
| Timeline |
| Merck Company |
| Lowes Companies |
Merck and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Lowes Companies
The main advantage of trading using opposite Merck and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Lowes Companies vs. Partner Communications | Lowes Companies vs. Merck Company | Lowes Companies vs. Western Midstream Partners | Lowes Companies vs. Edgewise Therapeutics |
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 Stocks Directory module to find actively traded stocks across global markets.
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