Correlation Between Merck and USCF Midstream
Can any of the company-specific risk be diversified away by investing in both Merck and USCF Midstream 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 Midstream 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 Midstream Energy, you can compare the effects of market volatilities on Merck and USCF Midstream 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 Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and USCF Midstream.
Diversification Opportunities for Merck and USCF Midstream
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and USCF is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and USCF Midstream Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF Midstream Energy 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 Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF Midstream Energy has no effect on the direction of Merck i.e., Merck and USCF Midstream go up and down completely randomly.
Pair Corralation between Merck and USCF Midstream
Considering the 90-day investment horizon Merck Company is expected to under-perform the USCF Midstream. In addition to that, Merck is 1.12 times more volatile than USCF Midstream Energy. It trades about -0.02 of its total potential returns per unit of risk. USCF Midstream Energy is currently generating about 0.53 per unit of volatility. If you would invest 4,695 in USCF Midstream Energy on September 1, 2024 and sell it today you would earn a total of 639.00 from holding USCF Midstream Energy or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. USCF Midstream Energy
Performance |
| Timeline |
| Merck Company |
| USCF Midstream Energy |
Merck and USCF Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and USCF Midstream
The main advantage of trading using opposite Merck and USCF Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, USCF Midstream 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 Midstream will offset losses from the drop in USCF Midstream's long position.The idea behind Merck Company and USCF Midstream Energy 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 Midstream vs. First Trust North | USCF Midstream vs. Global X MLP | USCF Midstream vs. Tortoise North American | USCF Midstream vs. UBS AG London |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |