Correlation Between Merck and COMMONSPIRIT
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By analyzing existing cross correlation between Merck Company and COMMONSPIRIT HEALTH, you can compare the effects of market volatilities on Merck and COMMONSPIRIT 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 COMMONSPIRIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and COMMONSPIRIT.
Diversification Opportunities for Merck and COMMONSPIRIT
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and COMMONSPIRIT is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and COMMONSPIRIT HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMONSPIRIT HEALTH 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 COMMONSPIRIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMONSPIRIT HEALTH has no effect on the direction of Merck i.e., Merck and COMMONSPIRIT go up and down completely randomly.
Pair Corralation between Merck and COMMONSPIRIT
Considering the 90-day investment horizon Merck Company is expected to under-perform the COMMONSPIRIT. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.34 times less risky than COMMONSPIRIT. The stock trades about -0.16 of its potential returns per unit of risk. The COMMONSPIRIT HEALTH is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 8,473 in COMMONSPIRIT HEALTH on September 2, 2024 and sell it today you would lose (508.00) from holding COMMONSPIRIT HEALTH or give up 6.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.63% |
| Values | Daily Returns |
Merck Company vs. COMMONSPIRIT HEALTH
Performance |
| Timeline |
| Merck Company |
| COMMONSPIRIT HEALTH |
Merck and COMMONSPIRIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and COMMONSPIRIT
The main advantage of trading using opposite Merck and COMMONSPIRIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, COMMONSPIRIT 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 COMMONSPIRIT will offset losses from the drop in COMMONSPIRIT's long position.The idea behind Merck Company and COMMONSPIRIT HEALTH 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.| COMMONSPIRIT vs. Electrovaya Common Shares | COMMONSPIRIT vs. SBM Offshore NV | COMMONSPIRIT vs. Inflection Point Acquisition | COMMONSPIRIT vs. Kandi Technologies Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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