Correlation Between Merck and VERIZON
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By analyzing existing cross correlation between Merck Company and VERIZON MUNICATIONS INC, you can compare the effects of market volatilities on Merck and VERIZON 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 VERIZON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and VERIZON.
Diversification Opportunities for Merck and VERIZON
Very poor diversification
The 3 months correlation between Merck and VERIZON is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and VERIZON MUNICATIONS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERIZON MUNICATIONS 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 VERIZON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERIZON MUNICATIONS INC has no effect on the direction of Merck i.e., Merck and VERIZON go up and down completely randomly.
Pair Corralation between Merck and VERIZON
Considering the 90-day investment horizon Merck Company is expected to generate 0.75 times more return on investment than VERIZON. However, Merck Company is 1.33 times less risky than VERIZON. It trades about -0.05 of its potential returns per unit of risk. VERIZON MUNICATIONS INC is currently generating about -0.17 per unit of risk. If you would invest 10,483 in Merck Company on August 31, 2024 and sell it today you would lose (171.00) from holding Merck Company or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 86.36% |
| Values | Daily Returns |
Merck Company vs. VERIZON MUNICATIONS INC
Performance |
| Timeline |
| Merck Company |
| VERIZON MUNICATIONS INC |
Merck and VERIZON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and VERIZON
The main advantage of trading using opposite Merck and VERIZON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, VERIZON 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 VERIZON will offset losses from the drop in VERIZON's long position.The idea behind Merck Company and VERIZON MUNICATIONS 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.| VERIZON vs. AEP TEX INC | VERIZON vs. US BANK NATIONAL | VERIZON vs. Bank of America | VERIZON vs. GE Aerospace |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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