Correlation Between Merck and Taylor
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By analyzing existing cross correlation between Merck Company and Taylor Morrison Communities, you can compare the effects of market volatilities on Merck and Taylor 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 Taylor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Taylor.
Diversification Opportunities for Merck and Taylor
Poor diversification
The 3 months correlation between Merck and Taylor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Taylor Morrison Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taylor Morrison Comm 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 Taylor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taylor Morrison Comm has no effect on the direction of Merck i.e., Merck and Taylor go up and down completely randomly.
Pair Corralation between Merck and Taylor
Considering the 90-day investment horizon Merck Company is expected to generate 2.6 times more return on investment than Taylor. However, Merck is 2.6 times more volatile than Taylor Morrison Communities. It trades about 0.01 of its potential returns per unit of risk. Taylor Morrison Communities is currently generating about -0.02 per unit of risk. If you would invest 10,120 in Merck Company on September 2, 2024 and sell it today you would earn a total of 44.00 from holding Merck Company or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.08% |
| Values | Daily Returns |
Merck Company vs. Taylor Morrison Communities
Performance |
| Timeline |
| Merck Company |
| Taylor Morrison Comm |
Merck and Taylor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Taylor
The main advantage of trading using opposite Merck and Taylor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Taylor 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 Taylor will offset losses from the drop in Taylor's long position.The idea behind Merck Company and Taylor Morrison Communities 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.| Taylor vs. Monster Beverage Corp | Taylor vs. Willamette Valley Vineyards | Taylor vs. Treasury Wine Estates | Taylor vs. Uber Technologies |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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