Correlation Between Merck and Horizon Spin-off
Can any of the company-specific risk be diversified away by investing in both Merck and Horizon Spin-off 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 Horizon Spin-off into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Horizon Spin Off And, you can compare the effects of market volatilities on Merck and Horizon Spin-off 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 Horizon Spin-off. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Horizon Spin-off.
Diversification Opportunities for Merck and Horizon Spin-off
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Horizon is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Horizon Spin Off And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Spin Off 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 Horizon Spin-off. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Spin Off has no effect on the direction of Merck i.e., Merck and Horizon Spin-off go up and down completely randomly.
Pair Corralation between Merck and Horizon Spin-off
Considering the 90-day investment horizon Merck Company is expected to under-perform the Horizon Spin-off. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.87 times less risky than Horizon Spin-off. The stock trades about -0.15 of its potential returns per unit of risk. The Horizon Spin Off And is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 2,376 in Horizon Spin Off And on August 31, 2024 and sell it today you would earn a total of 1,755 from holding Horizon Spin Off And or generate 73.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Horizon Spin Off And
Performance |
| Timeline |
| Merck Company |
| Horizon Spin Off |
Merck and Horizon Spin-off Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Horizon Spin-off
The main advantage of trading using opposite Merck and Horizon Spin-off positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Horizon Spin-off 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 Horizon Spin-off will offset losses from the drop in Horizon Spin-off's long position.The idea behind Merck Company and Horizon Spin Off And 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.| Horizon Spin-off vs. Fidelity Sai Convertible | Horizon Spin-off vs. Harbor Vertible Securities | Horizon Spin-off vs. The Gamco Global | Horizon Spin-off vs. Advent Claymore Convertible |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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