Correlation Between Merck and Tidal ETF
Can any of the company-specific risk be diversified away by investing in both Merck and Tidal 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 Tidal 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 Tidal ETF Trust, you can compare the effects of market volatilities on Merck and Tidal 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 Tidal ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Tidal ETF.
Diversification Opportunities for Merck and Tidal ETF
Very poor diversification
The 3 months correlation between Merck and Tidal is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Tidal ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal 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 Tidal ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal ETF Trust has no effect on the direction of Merck i.e., Merck and Tidal ETF go up and down completely randomly.
Pair Corralation between Merck and Tidal ETF
Considering the 90-day investment horizon Merck Company is expected to under-perform the Tidal ETF. In addition to that, Merck is 1.05 times more volatile than Tidal ETF Trust. It trades about -0.02 of its total potential returns per unit of risk. Tidal ETF Trust is currently generating about 0.05 per unit of volatility. If you would invest 1,399 in Tidal ETF Trust on September 1, 2024 and sell it today you would earn a total of 15.00 from holding Tidal ETF Trust or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Tidal ETF Trust
Performance |
| Timeline |
| Merck Company |
| Tidal ETF Trust |
Merck and Tidal ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Tidal ETF
The main advantage of trading using opposite Merck and Tidal ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Tidal 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 Tidal ETF will offset losses from the drop in Tidal ETF's long position.The idea behind Merck Company and Tidal 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.| Tidal ETF vs. iShares Core Growth | Tidal ETF vs. ClearShares OCIO ETF | Tidal ETF vs. Collaborative Investment Series | Tidal ETF vs. Northern Lights |
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 Stocks Directory module to find actively traded stocks across global markets.
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