Correlation Between Merck and D Wave
Can any of the company-specific risk be diversified away by investing in both Merck and D Wave 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 D Wave into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and D Wave Quantum, you can compare the effects of market volatilities on Merck and D Wave 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 D Wave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and D Wave.
Diversification Opportunities for Merck and D Wave
Excellent diversification
The 3 months correlation between Merck and QBTS is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and D Wave Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on D Wave Quantum 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 D Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of D Wave Quantum has no effect on the direction of Merck i.e., Merck and D Wave go up and down completely randomly.
Pair Corralation between Merck and D Wave
Considering the 90-day investment horizon Merck Company is expected to under-perform the D Wave. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 11.34 times less risky than D Wave. The stock trades about -0.18 of its potential returns per unit of risk. The D Wave Quantum is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 120.00 in D Wave Quantum on August 27, 2024 and sell it today you would earn a total of 173.00 from holding D Wave Quantum or generate 144.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. D Wave Quantum
Performance |
| Timeline |
| Merck Company |
| D Wave Quantum |
Merck and D Wave Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and D Wave
The main advantage of trading using opposite Merck and D Wave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, D Wave 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 D Wave will offset losses from the drop in D Wave's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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