Correlation Between Merck and Steward Covered
Can any of the company-specific risk be diversified away by investing in both Merck and Steward Covered 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 Steward Covered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Steward Ered Call, you can compare the effects of market volatilities on Merck and Steward Covered 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 Steward Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Steward Covered.
Diversification Opportunities for Merck and Steward Covered
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Steward is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Steward Ered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Ered Call 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 Steward Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Ered Call has no effect on the direction of Merck i.e., Merck and Steward Covered go up and down completely randomly.
Pair Corralation between Merck and Steward Covered
Considering the 90-day investment horizon Merck is expected to generate 4.36 times less return on investment than Steward Covered. In addition to that, Merck is 1.95 times more volatile than Steward Ered Call. It trades about 0.01 of its total potential returns per unit of risk. Steward Ered Call is currently generating about 0.06 per unit of volatility. If you would invest 781.00 in Steward Ered Call on September 1, 2024 and sell it today you would earn a total of 76.00 from holding Steward Ered Call or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Merck Company vs. Steward Ered Call
Performance |
| Timeline |
| Merck Company |
| Steward Ered Call |
Merck and Steward Covered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Steward Covered
The main advantage of trading using opposite Merck and Steward Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Steward Covered 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 Steward Covered will offset losses from the drop in Steward Covered's long position.The idea behind Merck Company and Steward Ered Call 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.| Steward Covered vs. Ft 7934 Corporate | Steward Covered vs. Rationalpier 88 Convertible | Steward Covered vs. Dreyfusstandish Global Fixed | Steward Covered vs. Touchstone Premium Yield |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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