Correlation Between Merck and 2023 ETF
Can any of the company-specific risk be diversified away by investing in both Merck and 2023 ETF 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 2023 ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and The 2023 ETF, you can compare the effects of market volatilities on Merck and 2023 ETF 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 2023 ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 2023 ETF.
Diversification Opportunities for Merck and 2023 ETF
Very good diversification
The 3 months correlation between Merck and 2023 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The 2023 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2023 ETF 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 2023 ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2023 ETF has no effect on the direction of Merck i.e., Merck and 2023 ETF go up and down completely randomly.
Pair Corralation between Merck and 2023 ETF
Considering the 90-day investment horizon Merck Company is expected to under-perform the 2023 ETF. In addition to that, Merck is 1.79 times more volatile than The 2023 ETF. It trades about -0.02 of its total potential returns per unit of risk. The 2023 ETF is currently generating about 0.27 per unit of volatility. If you would invest 3,155 in The 2023 ETF on September 1, 2024 and sell it today you would earn a total of 138.00 from holding The 2023 ETF or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. The 2023 ETF
Performance |
| Timeline |
| Merck Company |
| 2023 ETF |
Merck and 2023 ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and 2023 ETF
The main advantage of trading using opposite Merck and 2023 ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 2023 ETF 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 2023 ETF will offset losses from the drop in 2023 ETF's long position.The idea behind Merck Company and The 2023 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.| 2023 ETF vs. Vanguard Total Stock | 2023 ETF vs. SPDR SP 500 | 2023 ETF vs. iShares Core SP | 2023 ETF vs. Vanguard Dividend Appreciation |
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.
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