Correlation Between Merck and Simplify Exchange
Can any of the company-specific risk be diversified away by investing in both Merck and Simplify Exchange 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 Simplify Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Simplify Exchange Traded, you can compare the effects of market volatilities on Merck and Simplify Exchange 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 Simplify Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Simplify Exchange.
Diversification Opportunities for Merck and Simplify Exchange
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merck and Simplify is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded 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 Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of Merck i.e., Merck and Simplify Exchange go up and down completely randomly.
Pair Corralation between Merck and Simplify Exchange
Considering the 90-day investment horizon Merck Company is expected to under-perform the Simplify Exchange. In addition to that, Merck is 5.01 times more volatile than Simplify Exchange Traded. It trades about -0.28 of its total potential returns per unit of risk. Simplify Exchange Traded is currently generating about -0.22 per unit of volatility. If you would invest 5,131 in Simplify Exchange Traded on August 25, 2024 and sell it today you would lose (115.00) from holding Simplify Exchange Traded or give up 2.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Simplify Exchange Traded
Performance |
| Timeline |
| Merck Company |
| Simplify Exchange Traded |
Merck and Simplify Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Simplify Exchange
The main advantage of trading using opposite Merck and Simplify Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Simplify Exchange 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 Simplify Exchange will offset losses from the drop in Simplify Exchange's long position.| Merck vs. Capricor Therapeutics | Merck vs. Akari Therapeutics PLC | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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