Correlation Between Merck and SPDR Galaxy
Can any of the company-specific risk be diversified away by investing in both Merck and SPDR Galaxy 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 SPDR Galaxy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and SPDR Galaxy Transformative, you can compare the effects of market volatilities on Merck and SPDR Galaxy 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 SPDR Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SPDR Galaxy.
Diversification Opportunities for Merck and SPDR Galaxy
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and SPDR is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SPDR Galaxy Transformative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Transfor 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Transfor has no effect on the direction of Merck i.e., Merck and SPDR Galaxy go up and down completely randomly.
Pair Corralation between Merck and SPDR Galaxy
Considering the 90-day investment horizon Merck Company is expected to under-perform the SPDR Galaxy. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.16 times less risky than SPDR Galaxy. The stock trades about -0.03 of its potential returns per unit of risk. The SPDR Galaxy Transformative is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,225 in SPDR Galaxy Transformative on August 29, 2024 and sell it today you would earn a total of 83.00 from holding SPDR Galaxy Transformative or generate 2.57% 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. SPDR Galaxy Transformative
Performance |
| Timeline |
| Merck Company |
| SPDR Galaxy Transfor |
Merck and SPDR Galaxy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SPDR Galaxy
The main advantage of trading using opposite Merck and SPDR Galaxy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SPDR Galaxy 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 SPDR Galaxy will offset losses from the drop in SPDR Galaxy's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| SPDR Galaxy vs. Freedom Day Dividend | SPDR Galaxy vs. Franklin Templeton ETF | SPDR Galaxy vs. iShares MSCI China | SPDR Galaxy vs. Tidal Trust II |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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