Correlation Between Merck and Star Equity
Can any of the company-specific risk be diversified away by investing in both Merck and Star 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 Star 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 Star Equity Holdings, you can compare the effects of market volatilities on Merck and Star 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 Star Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Star Equity.
Diversification Opportunities for Merck and Star Equity
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Star is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Star Equity Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Equity Holdings 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 Star Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Equity Holdings has no effect on the direction of Merck i.e., Merck and Star Equity go up and down completely randomly.
Pair Corralation between Merck and Star Equity
Considering the 90-day investment horizon Merck Company is expected to generate 0.4 times more return on investment than Star Equity. However, Merck Company is 2.53 times less risky than Star Equity. It trades about -0.03 of its potential returns per unit of risk. Star Equity Holdings is currently generating about -0.27 per unit of risk. If you would invest 10,423 in Merck Company on August 29, 2024 and sell it today you would lose (111.00) from holding Merck Company or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Star Equity Holdings
Performance |
| Timeline |
| Merck Company |
| Star Equity Holdings |
Merck and Star Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Star Equity
The main advantage of trading using opposite Merck and Star Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Star 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 Star Equity will offset losses from the drop in Star Equity's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Star Equity vs. Genetic Technologies | Star Equity vs. Intelligent Bio Solutions | Star Equity vs. bioAffinity Technologies, | Star Equity vs. Thermo Fisher Scientific |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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