Correlation Between Merck and Innovator Growth
Can any of the company-specific risk be diversified away by investing in both Merck and Innovator Growth 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 Innovator Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Innovator Growth 100 Power, you can compare the effects of market volatilities on Merck and Innovator Growth 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 Innovator Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Innovator Growth.
Diversification Opportunities for Merck and Innovator Growth
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Innovator is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Innovator Growth 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Growth 100 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 Innovator Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Growth 100 has no effect on the direction of Merck i.e., Merck and Innovator Growth go up and down completely randomly.
Pair Corralation between Merck and Innovator Growth
Considering the 90-day investment horizon Merck Company is expected to under-perform the Innovator Growth. In addition to that, Merck is 2.79 times more volatile than Innovator Growth 100 Power. It trades about -0.02 of its total potential returns per unit of risk. Innovator Growth 100 Power is currently generating about 0.29 per unit of volatility. If you would invest 4,971 in Innovator Growth 100 Power on September 1, 2024 and sell it today you would earn a total of 150.00 from holding Innovator Growth 100 Power or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Innovator Growth 100 Power
Performance |
| Timeline |
| Merck Company |
| Innovator Growth 100 |
Merck and Innovator Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Innovator Growth
The main advantage of trading using opposite Merck and Innovator Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Innovator Growth 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 Innovator Growth will offset losses from the drop in Innovator Growth's long position.The idea behind Merck Company and Innovator Growth 100 Power 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.| Innovator Growth vs. Innovator Nasdaq 100 Power | Innovator Growth vs. Innovator Nasdaq 100 Power | Innovator Growth vs. Innovator SP 500 | Innovator Growth vs. Innovator SP 500 |
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 CEOs Directory module to screen CEOs from public companies around the world.
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