Correlation Between Merck and Micropac Industries
Can any of the company-specific risk be diversified away by investing in both Merck and Micropac Industries 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 Micropac Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Micropac Industries, you can compare the effects of market volatilities on Merck and Micropac Industries 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 Micropac Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Micropac Industries.
Diversification Opportunities for Merck and Micropac Industries
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Micropac is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Micropac Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micropac Industries 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 Micropac Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micropac Industries has no effect on the direction of Merck i.e., Merck and Micropac Industries go up and down completely randomly.
Pair Corralation between Merck and Micropac Industries
Considering the 90-day investment horizon Merck Company is expected to under-perform the Micropac Industries. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 4.31 times less risky than Micropac Industries. The stock trades about -0.22 of its potential returns per unit of risk. The Micropac Industries is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,595 in Micropac Industries on August 24, 2024 and sell it today you would earn a total of 377.00 from holding Micropac Industries or generate 23.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Micropac Industries
Performance |
| Timeline |
| Merck Company |
| Micropac Industries |
Merck and Micropac Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Micropac Industries
The main advantage of trading using opposite Merck and Micropac Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Micropac Industries 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 Micropac Industries will offset losses from the drop in Micropac Industries' long position.| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
| Micropac Industries vs. Boxlight Corp Class | Micropac Industries vs. Siyata Mobile | Micropac Industries vs. ClearOne | Micropac Industries vs. HUMANA INC |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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