Correlation Between Merck and AdvisorShares Psychedelics
Can any of the company-specific risk be diversified away by investing in both Merck and AdvisorShares Psychedelics 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 AdvisorShares Psychedelics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and AdvisorShares Psychedelics ETF, you can compare the effects of market volatilities on Merck and AdvisorShares Psychedelics 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 AdvisorShares Psychedelics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and AdvisorShares Psychedelics.
Diversification Opportunities for Merck and AdvisorShares Psychedelics
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and AdvisorShares is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and AdvisorShares Psychedelics ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Psychedelics 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 AdvisorShares Psychedelics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Psychedelics has no effect on the direction of Merck i.e., Merck and AdvisorShares Psychedelics go up and down completely randomly.
Pair Corralation between Merck and AdvisorShares Psychedelics
Considering the 90-day investment horizon Merck Company is expected to under-perform the AdvisorShares Psychedelics. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 6.23 times less risky than AdvisorShares Psychedelics. The stock trades about -0.11 of its potential returns per unit of risk. The AdvisorShares Psychedelics ETF is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,169 in AdvisorShares Psychedelics ETF on September 1, 2024 and sell it today you would earn a total of 49.00 from holding AdvisorShares Psychedelics ETF or generate 4.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Merck Company vs. AdvisorShares Psychedelics ETF
Performance |
| Timeline |
| Merck Company |
| AdvisorShares Psychedelics |
Merck and AdvisorShares Psychedelics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and AdvisorShares Psychedelics
The main advantage of trading using opposite Merck and AdvisorShares Psychedelics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, AdvisorShares Psychedelics 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 AdvisorShares Psychedelics will offset losses from the drop in AdvisorShares Psychedelics' long position.The idea behind Merck Company and AdvisorShares Psychedelics ETF 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.| AdvisorShares Psychedelics vs. Cybin Inc | AdvisorShares Psychedelics vs. ATAI Life Sciences | AdvisorShares Psychedelics vs. Numinus Wellness | AdvisorShares Psychedelics vs. GH Research PLC |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |