Correlation Between Merck and BOEING
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By analyzing existing cross correlation between Merck Company and BOEING CO, you can compare the effects of market volatilities on Merck and BOEING 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 BOEING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and BOEING.
Diversification Opportunities for Merck and BOEING
Poor diversification
The 3 months correlation between Merck and BOEING is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and BOEING CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOEING CO 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 BOEING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOEING CO has no effect on the direction of Merck i.e., Merck and BOEING go up and down completely randomly.
Pair Corralation between Merck and BOEING
Considering the 90-day investment horizon Merck Company is expected to under-perform the BOEING. In addition to that, Merck is 2.44 times more volatile than BOEING CO. It trades about -0.02 of its total potential returns per unit of risk. BOEING CO is currently generating about 0.1 per unit of volatility. If you would invest 9,120 in BOEING CO on September 1, 2024 and sell it today you would earn a total of 95.00 from holding BOEING CO or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Merck Company vs. BOEING CO
Performance |
| Timeline |
| Merck Company |
| BOEING CO |
Merck and BOEING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and BOEING
The main advantage of trading using opposite Merck and BOEING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, BOEING 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 BOEING will offset losses from the drop in BOEING's long position.The idea behind Merck Company and BOEING CO 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.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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