Correlation Between Merck and WisdomTree Corporate
Can any of the company-specific risk be diversified away by investing in both Merck and WisdomTree Corporate 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 WisdomTree Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and WisdomTree Corporate Bond, you can compare the effects of market volatilities on Merck and WisdomTree Corporate 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 WisdomTree Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and WisdomTree Corporate.
Diversification Opportunities for Merck and WisdomTree Corporate
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and WisdomTree is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and WisdomTree Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Corporate Bond 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 WisdomTree Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Corporate Bond has no effect on the direction of Merck i.e., Merck and WisdomTree Corporate go up and down completely randomly.
Pair Corralation between Merck and WisdomTree Corporate
Considering the 90-day investment horizon Merck Company is expected to under-perform the WisdomTree Corporate. In addition to that, Merck is 3.79 times more volatile than WisdomTree Corporate Bond. It trades about -0.18 of its total potential returns per unit of risk. WisdomTree Corporate Bond is currently generating about -0.03 per unit of volatility. If you would invest 4,500 in WisdomTree Corporate Bond on August 28, 2024 and sell it today you would lose (31.00) from holding WisdomTree Corporate Bond or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. WisdomTree Corporate Bond
Performance |
| Timeline |
| Merck Company |
| WisdomTree Corporate Bond |
Merck and WisdomTree Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and WisdomTree Corporate
The main advantage of trading using opposite Merck and WisdomTree Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, WisdomTree Corporate 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 WisdomTree Corporate will offset losses from the drop in WisdomTree Corporate's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| WisdomTree Corporate vs. Senstar Technologies | WisdomTree Corporate vs. ImmuCell | WisdomTree Corporate vs. Anika Therapeutics | WisdomTree Corporate vs. Aquagold International |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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