Correlation Between Merck and Texas Capital
Can any of the company-specific risk be diversified away by investing in both Merck and Texas Capital 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 Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Texas Capital Texas, you can compare the effects of market volatilities on Merck and Texas Capital 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 Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Texas Capital.
Diversification Opportunities for Merck and Texas Capital
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Texas is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Texas Capital Texas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Texas 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Texas has no effect on the direction of Merck i.e., Merck and Texas Capital go up and down completely randomly.
Pair Corralation between Merck and Texas Capital
Considering the 90-day investment horizon Merck is expected to generate 10.21 times less return on investment than Texas Capital. But when comparing it to its historical volatility, Merck Company is 1.04 times less risky than Texas Capital. It trades about 0.01 of its potential returns per unit of risk. Texas Capital Texas is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,509 in Texas Capital Texas on August 30, 2024 and sell it today you would earn a total of 459.00 from holding Texas Capital Texas or generate 18.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 47.68% |
| Values | Daily Returns |
Merck Company vs. Texas Capital Texas
Performance |
| Timeline |
| Merck Company |
| Texas Capital Texas |
Merck and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Texas Capital
The main advantage of trading using opposite Merck and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Texas Capital vs. Dimensional ETF Trust | Texas Capital vs. Vanguard Small Cap Index | Texas Capital vs. First Trust Multi Manager | Texas Capital vs. Vanguard SP Small Cap |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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