Correlation Between Merck and TOYOTA
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By analyzing existing cross correlation between Merck Company and TOYOTA MTR CR, you can compare the effects of market volatilities on Merck and TOYOTA 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 TOYOTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and TOYOTA.
Diversification Opportunities for Merck and TOYOTA
Poor diversification
The 3 months correlation between Merck and TOYOTA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and TOYOTA MTR CR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOYOTA MTR CR 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 TOYOTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOYOTA MTR CR has no effect on the direction of Merck i.e., Merck and TOYOTA go up and down completely randomly.
Pair Corralation between Merck and TOYOTA
Considering the 90-day investment horizon Merck Company is expected to under-perform the TOYOTA. In addition to that, Merck is 3.78 times more volatile than TOYOTA MTR CR. It trades about -0.12 of its total potential returns per unit of risk. TOYOTA MTR CR is currently generating about 0.04 per unit of volatility. If you would invest 9,523 in TOYOTA MTR CR on September 3, 2024 and sell it today you would earn a total of 153.00 from holding TOYOTA MTR CR or generate 1.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.0% |
| Values | Daily Returns |
Merck Company vs. TOYOTA MTR CR
Performance |
| Timeline |
| Merck Company |
| TOYOTA MTR CR |
Merck and TOYOTA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and TOYOTA
The main advantage of trading using opposite Merck and TOYOTA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, TOYOTA 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 TOYOTA will offset losses from the drop in TOYOTA's long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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