Correlation Between Merck and Exchange Traded
Can any of the company-specific risk be diversified away by investing in both Merck and Exchange Traded 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 Exchange Traded into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Exchange Traded Concepts, you can compare the effects of market volatilities on Merck and Exchange Traded 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 Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Exchange Traded.
Diversification Opportunities for Merck and Exchange Traded
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Exchange is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Merck i.e., Merck and Exchange Traded go up and down completely randomly.
Pair Corralation between Merck and Exchange Traded
Considering the 90-day investment horizon Merck Company is expected to under-perform the Exchange Traded. In addition to that, Merck is 2.07 times more volatile than Exchange Traded Concepts. It trades about 0.0 of its total potential returns per unit of risk. Exchange Traded Concepts is currently generating about 0.18 per unit of volatility. If you would invest 2,199 in Exchange Traded Concepts on September 2, 2024 and sell it today you would earn a total of 73.00 from holding Exchange Traded Concepts or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 8.06% |
| Values | Daily Returns |
Merck Company vs. Exchange Traded Concepts
Performance |
| Timeline |
| Merck Company |
| Exchange Traded Concepts |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Exchange Traded Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Exchange Traded
The main advantage of trading using opposite Merck and Exchange Traded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Exchange Traded 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 Exchange Traded will offset losses from the drop in Exchange Traded's long position.The idea behind Merck Company and Exchange Traded Concepts 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.| Exchange Traded vs. Cabana Target Drawdown | Exchange Traded vs. Cabana Target Drawdown | Exchange Traded vs. Timothy Plan International |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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