Correlation Between Merck and Senior Connect
Can any of the company-specific risk be diversified away by investing in both Merck and Senior Connect 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 Senior Connect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Senior Connect Acquisition, you can compare the effects of market volatilities on Merck and Senior Connect 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 Senior Connect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Senior Connect.
Diversification Opportunities for Merck and Senior Connect
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Senior is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Senior Connect Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senior Connect Acqui 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 Senior Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senior Connect Acqui has no effect on the direction of Merck i.e., Merck and Senior Connect go up and down completely randomly.
Pair Corralation between Merck and Senior Connect
Considering the 90-day investment horizon Merck Company is expected to generate 0.06 times more return on investment than Senior Connect. However, Merck Company is 18.09 times less risky than Senior Connect. It trades about 0.0 of its potential returns per unit of risk. Senior Connect Acquisition is currently generating about -0.07 per unit of risk. If you would invest 10,432 in Merck Company on August 25, 2024 and sell it today you would lose (514.00) from holding Merck Company or give up 4.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 17.51% |
| Values | Daily Returns |
Merck Company vs. Senior Connect Acquisition
Performance |
| Timeline |
| Merck Company |
| Senior Connect Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Senior Connect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Senior Connect
The main advantage of trading using opposite Merck and Senior Connect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Senior Connect 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 Senior Connect will offset losses from the drop in Senior Connect's long position.| Merck vs. Capricor Therapeutics | Merck vs. Akari Therapeutics PLC | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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