Correlation Between Merck and 6 Meridian
Can any of the company-specific risk be diversified away by investing in both Merck and 6 Meridian 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 6 Meridian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and 6 Meridian Quality, you can compare the effects of market volatilities on Merck and 6 Meridian 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 6 Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 6 Meridian.
Diversification Opportunities for Merck and 6 Meridian
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and SXQG is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and 6 Meridian Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 6 Meridian Quality 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 6 Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 6 Meridian Quality has no effect on the direction of Merck i.e., Merck and 6 Meridian go up and down completely randomly.
Pair Corralation between Merck and 6 Meridian
Considering the 90-day investment horizon Merck Company is expected to under-perform the 6 Meridian. In addition to that, Merck is 1.42 times more volatile than 6 Meridian Quality. It trades about -0.02 of its total potential returns per unit of risk. 6 Meridian Quality is currently generating about 0.36 per unit of volatility. If you would invest 3,059 in 6 Meridian Quality on September 1, 2024 and sell it today you would earn a total of 224.00 from holding 6 Meridian Quality or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. 6 Meridian Quality
Performance |
| Timeline |
| Merck Company |
| 6 Meridian Quality |
Merck and 6 Meridian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and 6 Meridian
The main advantage of trading using opposite Merck and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 6 Meridian 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 6 Meridian will offset losses from the drop in 6 Meridian's long position.The idea behind Merck Company and 6 Meridian Quality pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 6 Meridian vs. Vanguard Growth Index | 6 Meridian vs. iShares Russell 1000 | 6 Meridian vs. iShares SP 500 | 6 Meridian vs. iShares Core 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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