Correlation Between Merck and Liberty Media
Can any of the company-specific risk be diversified away by investing in both Merck and Liberty Media 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 Media 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 Media, you can compare the effects of market volatilities on Merck and Liberty Media 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 Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Liberty Media.
Diversification Opportunities for Merck and Liberty Media
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Liberty is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media 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 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Merck i.e., Merck and Liberty Media go up and down completely randomly.
Pair Corralation between Merck and Liberty Media
Considering the 90-day investment horizon Merck Company is expected to generate 0.48 times more return on investment than Liberty Media. However, Merck Company is 2.09 times less risky than Liberty Media. It trades about 0.0 of its potential returns per unit of risk. Liberty Media is currently generating about 0.0 per unit of risk. If you would invest 10,464 in Merck Company on August 24, 2024 and sell it today you would lose (546.00) from holding Merck Company or give up 5.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.45% |
| Values | Daily Returns |
Merck Company vs. Liberty Media
Performance |
| Timeline |
| Merck Company |
| Liberty Media |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Liberty Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Liberty Media
The main advantage of trading using opposite Merck and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Liberty Media 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 Media will offset losses from the drop in Liberty Media's long position.The idea behind Merck Company and Liberty Media 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.| Liberty Media vs. E W Scripps | Liberty Media vs. Gray Television | Liberty Media vs. Saga Communications | Liberty Media vs. Cumulus Media Class |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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