Correlation Between Merck and Consumer Products
Can any of the company-specific risk be diversified away by investing in both Merck and Consumer Products 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 Consumer Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Consumer Products Fund, you can compare the effects of market volatilities on Merck and Consumer Products 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 Consumer Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Consumer Products.
Diversification Opportunities for Merck and Consumer Products
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Consumer is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Consumer Products Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Products 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 Consumer Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Products has no effect on the direction of Merck i.e., Merck and Consumer Products go up and down completely randomly.
Pair Corralation between Merck and Consumer Products
Considering the 90-day investment horizon Merck Company is expected to under-perform the Consumer Products. In addition to that, Merck is 2.19 times more volatile than Consumer Products Fund. It trades about -0.1 of its total potential returns per unit of risk. Consumer Products Fund is currently generating about 0.1 per unit of volatility. If you would invest 4,279 in Consumer Products Fund on August 28, 2024 and sell it today you would earn a total of 54.00 from holding Consumer Products Fund or generate 1.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Consumer Products Fund
Performance |
| Timeline |
| Merck Company |
| Consumer Products |
Merck and Consumer Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Consumer Products
The main advantage of trading using opposite Merck and Consumer Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Consumer Products 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 Consumer Products will offset losses from the drop in Consumer Products' long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Consumer Products vs. Kellanova | Consumer Products vs. Bunge Limited | Consumer Products vs. BJs Wholesale Club | Consumer Products vs. Colgate Palmolive |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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