Correlation Between Merck and FlexShares Disciplined
Can any of the company-specific risk be diversified away by investing in both Merck and FlexShares Disciplined 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 FlexShares Disciplined into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and FlexShares Disciplined Duration, you can compare the effects of market volatilities on Merck and FlexShares Disciplined 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 FlexShares Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and FlexShares Disciplined.
Diversification Opportunities for Merck and FlexShares Disciplined
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merck and FlexShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and FlexShares Disciplined Duratio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Disciplined 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 FlexShares Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Disciplined has no effect on the direction of Merck i.e., Merck and FlexShares Disciplined go up and down completely randomly.
Pair Corralation between Merck and FlexShares Disciplined
Considering the 90-day investment horizon Merck Company is expected to under-perform the FlexShares Disciplined. In addition to that, Merck is 3.94 times more volatile than FlexShares Disciplined Duration. It trades about -0.01 of its total potential returns per unit of risk. FlexShares Disciplined Duration is currently generating about 0.08 per unit of volatility. If you would invest 2,047 in FlexShares Disciplined Duration on August 30, 2024 and sell it today you would earn a total of 12.00 from holding FlexShares Disciplined Duration or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. FlexShares Disciplined Duratio
Performance |
| Timeline |
| Merck Company |
| FlexShares Disciplined |
Merck and FlexShares Disciplined Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and FlexShares Disciplined
The main advantage of trading using opposite Merck and FlexShares Disciplined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, FlexShares Disciplined 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 FlexShares Disciplined will offset losses from the drop in FlexShares Disciplined's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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