Correlation Between Merck and PRUDENTIAL
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By analyzing existing cross correlation between Merck Company and PRUDENTIAL FINL INC, you can compare the effects of market volatilities on Merck and PRUDENTIAL 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 PRUDENTIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and PRUDENTIAL.
Diversification Opportunities for Merck and PRUDENTIAL
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and PRUDENTIAL is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and PRUDENTIAL FINL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRUDENTIAL FINL INC 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 PRUDENTIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRUDENTIAL FINL INC has no effect on the direction of Merck i.e., Merck and PRUDENTIAL go up and down completely randomly.
Pair Corralation between Merck and PRUDENTIAL
Considering the 90-day investment horizon Merck Company is expected to under-perform the PRUDENTIAL. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.45 times less risky than PRUDENTIAL. The stock trades about 0.0 of its potential returns per unit of risk. The PRUDENTIAL FINL INC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 9,839 in PRUDENTIAL FINL INC on August 31, 2024 and sell it today you would earn a total of 872.00 from holding PRUDENTIAL FINL INC or generate 8.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 27.54% |
| Values | Daily Returns |
Merck Company vs. PRUDENTIAL FINL INC
Performance |
| Timeline |
| Merck Company |
| PRUDENTIAL FINL INC |
Merck and PRUDENTIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and PRUDENTIAL
The main advantage of trading using opposite Merck and PRUDENTIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, PRUDENTIAL 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 PRUDENTIAL will offset losses from the drop in PRUDENTIAL's long position.The idea behind Merck Company and PRUDENTIAL FINL INC 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.| PRUDENTIAL vs. Griffon | PRUDENTIAL vs. Aldel Financial II | PRUDENTIAL vs. Mesa Air Group | PRUDENTIAL vs. Westinghouse Air Brake |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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