Correlation Between Merck and SoFi Select
Can any of the company-specific risk be diversified away by investing in both Merck and SoFi Select 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 SoFi Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and SoFi Select 500, you can compare the effects of market volatilities on Merck and SoFi Select 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 SoFi Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SoFi Select.
Diversification Opportunities for Merck and SoFi Select
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Merck and SoFi is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SoFi Select 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Select 500 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 SoFi Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Select 500 has no effect on the direction of Merck i.e., Merck and SoFi Select go up and down completely randomly.
Pair Corralation between Merck and SoFi Select
Considering the 90-day investment horizon Merck Company is expected to under-perform the SoFi Select. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.14 times less risky than SoFi Select. The stock trades about -0.37 of its potential returns per unit of risk. The SoFi Select 500 is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest 10,174 in SoFi Select 500 on January 8, 2025 and sell it today you would lose (979.00) from holding SoFi Select 500 or give up 9.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. SoFi Select 500
Performance |
| Timeline |
| Merck Company |
| SoFi Select 500 |
Merck and SoFi Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SoFi Select
The main advantage of trading using opposite Merck and SoFi Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SoFi Select 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 SoFi Select will offset losses from the drop in SoFi Select's long position.| Merck vs. Upper Street Marketing | Merck vs. Virtual Medical International | Merck vs. Grey Cloak Tech | Merck vs. CuraScientific Corp |
| SoFi Select vs. Berry Petroleum Corp | SoFi Select vs. Comstock Resources | SoFi Select vs. SoFi Next 500 | SoFi Select vs. SM Energy Co |
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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