Correlation Between Merck and USCF ETF
Can any of the company-specific risk be diversified away by investing in both Merck and USCF ETF 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 USCF ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and USCF ETF Trust, you can compare the effects of market volatilities on Merck and USCF ETF 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 USCF ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and USCF ETF.
Diversification Opportunities for Merck and USCF ETF
Pay attention - limited upside
The 3 months correlation between Merck and USCF is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and USCF ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF ETF Trust 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 USCF ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF ETF Trust has no effect on the direction of Merck i.e., Merck and USCF ETF go up and down completely randomly.
Pair Corralation between Merck and USCF ETF
Considering the 90-day investment horizon Merck Company is expected to under-perform the USCF ETF. In addition to that, Merck is 1.94 times more volatile than USCF ETF Trust. It trades about -0.11 of its total potential returns per unit of risk. USCF ETF Trust is currently generating about 0.17 per unit of volatility. If you would invest 2,659 in USCF ETF Trust on September 1, 2024 and sell it today you would earn a total of 479.00 from holding USCF ETF Trust or generate 18.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Merck Company vs. USCF ETF Trust
Performance |
| Timeline |
| Merck Company |
| USCF ETF Trust |
Merck and USCF ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and USCF ETF
The main advantage of trading using opposite Merck and USCF ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, USCF ETF 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 USCF ETF will offset losses from the drop in USCF ETF's long position.The idea behind Merck Company and USCF ETF Trust 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.| USCF ETF vs. Franklin Templeton ETF | USCF ETF vs. Altrius Global Dividend | USCF ETF vs. Invesco Exchange Traded | USCF ETF vs. Franklin International Core |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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