Correlation Between Merck and Invesco Short
Can any of the company-specific risk be diversified away by investing in both Merck and Invesco Short 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 Invesco Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Invesco Short Term, you can compare the effects of market volatilities on Merck and Invesco Short 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 Invesco Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Invesco Short.
Diversification Opportunities for Merck and Invesco Short
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Invesco is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Invesco Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Short Term 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 Invesco Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Short Term has no effect on the direction of Merck i.e., Merck and Invesco Short go up and down completely randomly.
Pair Corralation between Merck and Invesco Short
Considering the 90-day investment horizon Merck Company is expected to under-perform the Invesco Short. In addition to that, Merck is 33.02 times more volatile than Invesco Short Term. It trades about -0.02 of its total potential returns per unit of risk. Invesco Short Term is currently generating about 0.49 per unit of volatility. If you would invest 9,583 in Invesco Short Term on November 9, 2024 and sell it today you would earn a total of 977.00 from holding Invesco Short Term or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Invesco Short Term
Performance |
| Timeline |
| Merck Company |
| Invesco Short Term |
Merck and Invesco Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Invesco Short
The main advantage of trading using opposite Merck and Invesco Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Invesco Short 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 Invesco Short will offset losses from the drop in Invesco Short's long position.The idea behind Merck Company and Invesco Short Term 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.| Invesco Short vs. Invesco Aaa Clo | Invesco Short vs. Invesco High Yield | Invesco Short vs. Invesco Actively Managed | Invesco Short vs. Invesco SP MidCap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |