Correlation Between Merck and Muncy Bank
Can any of the company-specific risk be diversified away by investing in both Merck and Muncy Bank 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 Muncy Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Muncy Bank Financial, you can compare the effects of market volatilities on Merck and Muncy Bank 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 Muncy Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Muncy Bank.
Diversification Opportunities for Merck and Muncy Bank
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Muncy is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Muncy Bank Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muncy Bank Financial 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 Muncy Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muncy Bank Financial has no effect on the direction of Merck i.e., Merck and Muncy Bank go up and down completely randomly.
Pair Corralation between Merck and Muncy Bank
If you would invest 3,805 in Muncy Bank Financial on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Muncy Bank Financial or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 0.53% |
| Values | Daily Returns |
Merck Company vs. Muncy Bank Financial
Performance |
| Timeline |
| Merck Company |
| Muncy Bank Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Muncy Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Muncy Bank
The main advantage of trading using opposite Merck and Muncy Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Muncy Bank 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 Muncy Bank will offset losses from the drop in Muncy Bank's long position.The idea behind Merck Company and Muncy Bank Financial 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.| Muncy Bank vs. Main Street Financial | Muncy Bank vs. Susquehanna Community Financial | Muncy Bank vs. First Keystone Corp | Muncy Bank vs. Mifflinburg Bancorp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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