Correlation Between Merck and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Merck and SPDR Portfolio 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 SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and SPDR Portfolio SP, you can compare the effects of market volatilities on Merck and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SPDR Portfolio.
Diversification Opportunities for Merck and SPDR Portfolio
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and SPDR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Merck i.e., Merck and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Merck and SPDR Portfolio
Considering the 90-day investment horizon Merck is expected to generate 48.86 times less return on investment than SPDR Portfolio. In addition to that, Merck is 1.04 times more volatile than SPDR Portfolio SP. It trades about 0.0 of its total potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.09 per unit of volatility. If you would invest 3,797 in SPDR Portfolio SP on August 27, 2024 and sell it today you would earn a total of 1,064 from holding SPDR Portfolio SP or generate 28.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. SPDR Portfolio SP
Performance |
| Timeline |
| Merck Company |
| SPDR Portfolio SP |
Merck and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SPDR Portfolio
The main advantage of trading using opposite Merck and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SPDR Portfolio 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 SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| SPDR Portfolio vs. SPDR Russell Small | SPDR Portfolio vs. SPDR SP World | SPDR Portfolio vs. SPDR Portfolio Emerging | SPDR Portfolio vs. SPDR Portfolio SP |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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