Correlation Between Merck and ProPhase Labs
Can any of the company-specific risk be diversified away by investing in both Merck and ProPhase Labs 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 ProPhase Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ProPhase Labs, you can compare the effects of market volatilities on Merck and ProPhase Labs 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 ProPhase Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ProPhase Labs.
Diversification Opportunities for Merck and ProPhase Labs
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and ProPhase is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ProPhase Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPhase Labs 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 ProPhase Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPhase Labs has no effect on the direction of Merck i.e., Merck and ProPhase Labs go up and down completely randomly.
Pair Corralation between Merck and ProPhase Labs
Considering the 90-day investment horizon Merck Company is expected to generate 0.11 times more return on investment than ProPhase Labs. However, Merck Company is 8.83 times less risky than ProPhase Labs. It trades about -0.02 of its potential returns per unit of risk. ProPhase Labs is currently generating about -0.37 per unit of risk. If you would invest 10,232 in Merck Company on September 1, 2024 and sell it today you would lose (68.00) from holding Merck Company or give up 0.66% 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. ProPhase Labs
Performance |
| Timeline |
| Merck Company |
| ProPhase Labs |
Merck and ProPhase Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ProPhase Labs
The main advantage of trading using opposite Merck and ProPhase Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ProPhase Labs 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 ProPhase Labs will offset losses from the drop in ProPhase Labs' long position.The idea behind Merck Company and ProPhase Labs 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.| ProPhase Labs vs. Star Equity Holdings | ProPhase Labs vs. Enzo Biochem | ProPhase Labs vs. Neuronetics | ProPhase Labs vs. Intelligent Bio Solutions |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| 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 | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |