Correlation Between Merck and Putnam Global
Can any of the company-specific risk be diversified away by investing in both Merck and Putnam Global 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 Putnam Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Putnam Global Equity, you can compare the effects of market volatilities on Merck and Putnam Global 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 Putnam Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Putnam Global.
Diversification Opportunities for Merck and Putnam Global
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Putnam is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Putnam Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Equity 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 Putnam Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Global Equity has no effect on the direction of Merck i.e., Merck and Putnam Global go up and down completely randomly.
Pair Corralation between Merck and Putnam Global
Considering the 90-day investment horizon Merck Company is expected to generate 1.75 times more return on investment than Putnam Global. However, Merck is 1.75 times more volatile than Putnam Global Equity. It trades about -0.1 of its potential returns per unit of risk. Putnam Global Equity is currently generating about -0.22 per unit of risk. If you would invest 10,423 in Merck Company on August 28, 2024 and sell it today you would lose (307.00) from holding Merck Company or give up 2.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Putnam Global Equity
Performance |
| Timeline |
| Merck Company |
| Putnam Global Equity |
Merck and Putnam Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Putnam Global
The main advantage of trading using opposite Merck and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Putnam Global 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 Putnam Global will offset losses from the drop in Putnam Global's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Putnam Global vs. Putnam Equity Income | Putnam Global vs. Putnam Tax Exempt | Putnam Global vs. Putnam Floating Rate | Putnam Global vs. Putnam High Yield |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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