Correlation Between Merck and PetIQ
Can any of the company-specific risk be diversified away by investing in both Merck and PetIQ 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 PetIQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and PetIQ Inc, you can compare the effects of market volatilities on Merck and PetIQ 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 PetIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and PetIQ.
Diversification Opportunities for Merck and PetIQ
Excellent diversification
The 3 months correlation between Merck and PetIQ is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and PetIQ Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetIQ Inc 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 PetIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetIQ Inc has no effect on the direction of Merck i.e., Merck and PetIQ go up and down completely randomly.
Pair Corralation between Merck and PetIQ
Considering the 90-day investment horizon Merck Company is expected to under-perform the PetIQ. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.68 times less risky than PetIQ. The stock trades about 0.0 of its potential returns per unit of risk. The PetIQ Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,407 in PetIQ Inc on September 4, 2024 and sell it today you would earn a total of 1,691 from holding PetIQ Inc or generate 120.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 93.03% |
| Values | Daily Returns |
Merck Company vs. PetIQ Inc
Performance |
| Timeline |
| Merck Company |
| PetIQ Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Strong
Merck and PetIQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and PetIQ
The main advantage of trading using opposite Merck and PetIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, PetIQ 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 PetIQ will offset losses from the drop in PetIQ's long position.| Merck vs. Crinetics Pharmaceuticals | Merck vs. Enanta Pharmaceuticals | Merck vs. Amicus Therapeutics | Merck vs. Connect Biopharma Holdings |
| PetIQ vs. Prestige Brand Holdings | PetIQ vs. Collegium Pharmaceutical | PetIQ vs. Silver Spike Investment | PetIQ vs. Regencell Bioscience 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |