Correlation Between Merck and AllianzIM Equity
Can any of the company-specific risk be diversified away by investing in both Merck and AllianzIM Equity 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 AllianzIM Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and AllianzIM Equity Buffer15, you can compare the effects of market volatilities on Merck and AllianzIM Equity 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 AllianzIM Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and AllianzIM Equity.
Diversification Opportunities for Merck and AllianzIM Equity
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and AllianzIM is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and AllianzIM Equity Buffer15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllianzIM Equity Buffer15 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 AllianzIM Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllianzIM Equity Buffer15 has no effect on the direction of Merck i.e., Merck and AllianzIM Equity go up and down completely randomly.
Pair Corralation between Merck and AllianzIM Equity
Considering the 90-day investment horizon Merck Company is expected to under-perform the AllianzIM Equity. In addition to that, Merck is 2.25 times more volatile than AllianzIM Equity Buffer15. It trades about -0.02 of its total potential returns per unit of risk. AllianzIM Equity Buffer15 is currently generating about 0.34 per unit of volatility. If you would invest 2,528 in AllianzIM Equity Buffer15 on September 1, 2024 and sell it today you would earn a total of 109.00 from holding AllianzIM Equity Buffer15 or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. AllianzIM Equity Buffer15
Performance |
| Timeline |
| Merck Company |
| AllianzIM Equity Buffer15 |
Merck and AllianzIM Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and AllianzIM Equity
The main advantage of trading using opposite Merck and AllianzIM Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, AllianzIM Equity 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 AllianzIM Equity will offset losses from the drop in AllianzIM Equity's long position.The idea behind Merck Company and AllianzIM Equity Buffer15 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.| AllianzIM Equity vs. Innovator ETFs Trust | AllianzIM Equity vs. First Trust Cboe | AllianzIM Equity vs. Innovator SP 500 | AllianzIM Equity vs. Innovator SP 500 |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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