Correlation Between Merck and RAADR
Can any of the company-specific risk be diversified away by investing in both Merck and RAADR 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 RAADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and RAADR Inc, you can compare the effects of market volatilities on Merck and RAADR 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 RAADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and RAADR.
Diversification Opportunities for Merck and RAADR
Excellent diversification
The 3 months correlation between Merck and RAADR is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and RAADR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAADR Inc 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 RAADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAADR Inc has no effect on the direction of Merck i.e., Merck and RAADR go up and down completely randomly.
Pair Corralation between Merck and RAADR
Considering the 90-day investment horizon Merck Company is expected to under-perform the RAADR. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 42.86 times less risky than RAADR. The stock trades about 0.0 of its potential returns per unit of risk. The RAADR Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.00 in RAADR Inc on September 4, 2024 and sell it today you would lose (0.89) from holding RAADR Inc or give up 89.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. RAADR Inc
Performance |
| Timeline |
| Merck Company |
| RAADR Inc |
Merck and RAADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and RAADR
The main advantage of trading using opposite Merck and RAADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, RAADR 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 RAADR will offset losses from the drop in RAADR's long position.| Merck vs. Crinetics Pharmaceuticals | Merck vs. Enanta Pharmaceuticals | Merck vs. Amicus Therapeutics | Merck vs. Connect Biopharma Holdings |
| RAADR vs. Eline Entertainment Group | RAADR vs. Green Leaf Innovations | RAADR vs. Plandai Biotech | RAADR vs. All American Gld |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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