Correlation Between Merck and ProShares
Can any of the company-specific risk be diversified away by investing in both Merck and ProShares 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 ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ProShares SP Technology, you can compare the effects of market volatilities on Merck and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ProShares.
Diversification Opportunities for Merck and ProShares
Very good diversification
The 3 months correlation between Merck and ProShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ProShares SP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Technology 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Technology has no effect on the direction of Merck i.e., Merck and ProShares go up and down completely randomly.
Pair Corralation between Merck and ProShares
Considering the 90-day investment horizon Merck is expected to generate 8.97 times less return on investment than ProShares. In addition to that, Merck is 1.17 times more volatile than ProShares SP Technology. It trades about 0.01 of its total potential returns per unit of risk. ProShares SP Technology is currently generating about 0.07 per unit of volatility. If you would invest 5,617 in ProShares SP Technology on August 30, 2024 and sell it today you would earn a total of 2,105 from holding ProShares SP Technology or generate 37.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. ProShares SP Technology
Performance |
| Timeline |
| Merck Company |
| ProShares SP Technology |
Merck and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ProShares
The main advantage of trading using opposite Merck and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ProShares 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 ProShares will offset losses from the drop in ProShares' long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| ProShares vs. Nexalin Technology | ProShares vs. Kilroy Realty Corp | ProShares vs. Highwoods Properties | ProShares vs. Karat Packaging |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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