Correlation Between Merck and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both Merck and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and The Travelers Companies, you can compare the effects of market volatilities on Merck and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Travelers Companies.
Diversification Opportunities for Merck and Travelers Companies
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Travelers is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Merck i.e., Merck and Travelers Companies go up and down completely randomly.
Pair Corralation between Merck and Travelers Companies
Considering the 90-day investment horizon Merck Company is expected to under-perform the Travelers Companies. In addition to that, Merck is 1.04 times more volatile than The Travelers Companies. It trades about -0.1 of its total potential returns per unit of risk. The Travelers Companies is currently generating about 0.13 per unit of volatility. If you would invest 25,237 in The Travelers Companies on August 28, 2024 and sell it today you would earn a total of 885.00 from holding The Travelers Companies or generate 3.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. The Travelers Companies
Performance |
| Timeline |
| Merck Company |
| The Travelers Companies |
Merck and Travelers Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Travelers Companies
The main advantage of trading using opposite Merck and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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