Correlation Between Merck and SHP ETF
Can any of the company-specific risk be diversified away by investing in both Merck and SHP ETF 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 SHP ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and SHP ETF Trust, you can compare the effects of market volatilities on Merck and SHP ETF 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 SHP ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SHP ETF.
Diversification Opportunities for Merck and SHP ETF
Pay attention - limited upside
The 3 months correlation between Merck and SHP is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of Merck i.e., Merck and SHP ETF go up and down completely randomly.
Pair Corralation between Merck and SHP ETF
Considering the 90-day investment horizon Merck Company is expected to under-perform the SHP ETF. In addition to that, Merck is 2.37 times more volatile than SHP ETF Trust. It trades about -0.03 of its total potential returns per unit of risk. SHP ETF Trust is currently generating about 0.2 per unit of volatility. If you would invest 5,082 in SHP ETF Trust on August 29, 2024 and sell it today you would earn a total of 133.00 from holding SHP ETF Trust or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. SHP ETF Trust
Performance |
| Timeline |
| Merck Company |
| SHP ETF Trust |
Merck and SHP ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SHP ETF
The main advantage of trading using opposite Merck and SHP ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SHP ETF 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 SHP ETF will offset losses from the drop in SHP ETF's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| SHP ETF vs. Global X SP | SHP ETF vs. Amplify CWP Enhanced | SHP ETF vs. Global X Russell | SHP ETF vs. JPMorgan Nasdaq Equity |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |