Correlation Between Merck and Pacific Financial
Can any of the company-specific risk be diversified away by investing in both Merck and Pacific Financial 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 Pacific Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Pacific Financial Corp, you can compare the effects of market volatilities on Merck and Pacific Financial 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 Pacific Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Pacific Financial.
Diversification Opportunities for Merck and Pacific Financial
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Pacific is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Pacific Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Financial Corp 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 Pacific Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Financial Corp has no effect on the direction of Merck i.e., Merck and Pacific Financial go up and down completely randomly.
Pair Corralation between Merck and Pacific Financial
Considering the 90-day investment horizon Merck Company is expected to under-perform the Pacific Financial. In addition to that, Merck is 1.0 times more volatile than Pacific Financial Corp. It trades about -0.11 of its total potential returns per unit of risk. Pacific Financial Corp is currently generating about 0.16 per unit of volatility. If you would invest 975.00 in Pacific Financial Corp on September 2, 2024 and sell it today you would earn a total of 325.00 from holding Pacific Financial Corp or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Pacific Financial Corp
Performance |
| Timeline |
| Merck Company |
| Pacific Financial Corp |
Merck and Pacific Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Pacific Financial
The main advantage of trading using opposite Merck and Pacific Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Pacific Financial 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 Pacific Financial will offset losses from the drop in Pacific Financial's long position.The idea behind Merck Company and Pacific Financial Corp 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.| Pacific Financial vs. Pioneer Bankcorp | Pacific Financial vs. Liberty Northwest Bancorp | Pacific Financial vs. First Community | Pacific Financial vs. Coeur dAlene 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |