Correlation Between Merck and Simplify Equity
Can any of the company-specific risk be diversified away by investing in both Merck and Simplify 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 Simplify 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 Simplify Equity PLUS, you can compare the effects of market volatilities on Merck and Simplify 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 Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Simplify Equity.
Diversification Opportunities for Merck and Simplify Equity
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Simplify is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Merck i.e., Merck and Simplify Equity go up and down completely randomly.
Pair Corralation between Merck and Simplify Equity
Considering the 90-day investment horizon Merck is expected to generate 108.9 times less return on investment than Simplify Equity. In addition to that, Merck is 1.11 times more volatile than Simplify Equity PLUS. It trades about 0.0 of its total potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.1 per unit of volatility. If you would invest 2,719 in Simplify Equity PLUS on September 3, 2024 and sell it today you would earn a total of 1,797 from holding Simplify Equity PLUS or generate 66.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Simplify Equity PLUS
Performance |
| Timeline |
| Merck Company |
| Simplify Equity PLUS |
Merck and Simplify Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Simplify Equity
The main advantage of trading using opposite Merck and Simplify Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Simplify 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 Simplify Equity will offset losses from the drop in Simplify Equity's long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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