Correlation Between Merck and Equity Income
Can any of the company-specific risk be diversified away by investing in both Merck and Equity Income 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 Equity Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Equity Income Fund, you can compare the effects of market volatilities on Merck and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Equity Income.
Diversification Opportunities for Merck and Equity Income
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and EQUITY is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Merck i.e., Merck and Equity Income go up and down completely randomly.
Pair Corralation between Merck and Equity Income
Considering the 90-day investment horizon Merck Company is expected to under-perform the Equity Income. In addition to that, Merck is 1.82 times more volatile than Equity Income Fund. It trades about -0.17 of its total potential returns per unit of risk. Equity Income Fund is currently generating about 0.16 per unit of volatility. If you would invest 4,353 in Equity Income Fund on August 30, 2024 and sell it today you would earn a total of 209.00 from holding Equity Income Fund or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Equity Income Fund
Performance |
| Timeline |
| Merck Company |
| Equity Income |
Merck and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Equity Income
The main advantage of trading using opposite Merck and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
| Equity Income vs. Us Government Securities | Equity Income vs. Federated Government Ultrashort | Equity Income vs. Lord Abbett Government | Equity Income vs. Prudential Government Income |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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