Correlation Between Merck and Clime Investment
Can any of the company-specific risk be diversified away by investing in both Merck and Clime Investment 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 Clime Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Clime Investment Management, you can compare the effects of market volatilities on Merck and Clime Investment 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 Clime Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Clime Investment.
Diversification Opportunities for Merck and Clime Investment
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and Clime is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Clime Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clime Investment Man 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 Clime Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clime Investment Man has no effect on the direction of Merck i.e., Merck and Clime Investment go up and down completely randomly.
Pair Corralation between Merck and Clime Investment
Considering the 90-day investment horizon Merck Company is expected to generate 0.26 times more return on investment than Clime Investment. However, Merck Company is 3.83 times less risky than Clime Investment. It trades about -0.02 of its potential returns per unit of risk. Clime Investment Management is currently generating about -0.08 per unit of risk. If you would invest 10,232 in Merck Company on September 1, 2024 and sell it today you would lose (68.00) from holding Merck Company or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Clime Investment Management
Performance |
| Timeline |
| Merck Company |
| Clime Investment Man |
Merck and Clime Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Clime Investment
The main advantage of trading using opposite Merck and Clime Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Clime Investment 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 Clime Investment will offset losses from the drop in Clime Investment's long position.The idea behind Merck Company and Clime Investment Management 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.| Clime Investment vs. ATT Inc | Clime Investment vs. Merck Company | Clime Investment vs. Walt Disney | Clime Investment vs. Caterpillar |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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