Correlation Between Merck and CATERPILLAR
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By analyzing existing cross correlation between Merck Company and CATERPILLAR INC 53, you can compare the effects of market volatilities on Merck and CATERPILLAR 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 CATERPILLAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CATERPILLAR.
Diversification Opportunities for Merck and CATERPILLAR
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and CATERPILLAR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CATERPILLAR INC 53 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CATERPILLAR INC 53 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 CATERPILLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CATERPILLAR INC 53 has no effect on the direction of Merck i.e., Merck and CATERPILLAR go up and down completely randomly.
Pair Corralation between Merck and CATERPILLAR
Considering the 90-day investment horizon Merck is expected to generate 1.99 times less return on investment than CATERPILLAR. In addition to that, Merck is 2.0 times more volatile than CATERPILLAR INC 53. It trades about 0.02 of its total potential returns per unit of risk. CATERPILLAR INC 53 is currently generating about 0.06 per unit of volatility. If you would invest 10,345 in CATERPILLAR INC 53 on September 12, 2024 and sell it today you would earn a total of 87.00 from holding CATERPILLAR INC 53 or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Merck Company vs. CATERPILLAR INC 53
Performance |
| Timeline |
| Merck Company |
| CATERPILLAR INC 53 |
Merck and CATERPILLAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and CATERPILLAR
The main advantage of trading using opposite Merck and CATERPILLAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, CATERPILLAR 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 CATERPILLAR will offset losses from the drop in CATERPILLAR's long position.| Merck vs. Victory Integrity Smallmid Cap | Merck vs. Hilton Worldwide Holdings | Merck vs. NVIDIA | Merck vs. JPMorgan Chase Co |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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