Correlation Between Merck and IQ Real
Can any of the company-specific risk be diversified away by investing in both Merck and IQ Real 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 IQ Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and IQ Real Estate, you can compare the effects of market volatilities on Merck and IQ Real 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 IQ Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and IQ Real.
Diversification Opportunities for Merck and IQ Real
Poor diversification
The 3 months correlation between Merck and ROOF is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and IQ Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Real Estate 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 IQ Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Real Estate has no effect on the direction of Merck i.e., Merck and IQ Real go up and down completely randomly.
Pair Corralation between Merck and IQ Real
Considering the 90-day investment horizon Merck Company is expected to generate 1.54 times more return on investment than IQ Real. However, Merck is 1.54 times more volatile than IQ Real Estate. It trades about -0.01 of its potential returns per unit of risk. IQ Real Estate is currently generating about -0.18 per unit of risk. If you would invest 10,373 in Merck Company on August 30, 2024 and sell it today you would lose (61.00) from holding Merck Company or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Merck Company vs. IQ Real Estate
Performance |
| Timeline |
| Merck Company |
| IQ Real Estate |
Merck and IQ Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and IQ Real
The main advantage of trading using opposite Merck and IQ Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, IQ Real 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 IQ Real will offset losses from the drop in IQ Real's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| IQ Real vs. Invesco Active Real | IQ Real vs. First Trust SP | IQ Real vs. Invesco KBW Premium | IQ Real vs. VanEck Mortgage REIT |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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