Correlation Between Merck and WELLS
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By analyzing existing cross correlation between Merck Company and WELLS FARGO NEW, you can compare the effects of market volatilities on Merck and WELLS 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 WELLS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and WELLS.
Diversification Opportunities for Merck and WELLS
Poor diversification
The 3 months correlation between Merck and WELLS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and WELLS FARGO NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLS FARGO NEW 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 WELLS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELLS FARGO NEW has no effect on the direction of Merck i.e., Merck and WELLS go up and down completely randomly.
Pair Corralation between Merck and WELLS
Considering the 90-day investment horizon Merck Company is expected to under-perform the WELLS. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.07 times less risky than WELLS. The stock trades about -0.02 of its potential returns per unit of risk. The WELLS FARGO NEW is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 9,627 in WELLS FARGO NEW on September 1, 2024 and sell it today you would earn a total of 389.00 from holding WELLS FARGO NEW or generate 4.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. WELLS FARGO NEW
Performance |
| Timeline |
| Merck Company |
| WELLS FARGO NEW |
Merck and WELLS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and WELLS
The main advantage of trading using opposite Merck and WELLS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, WELLS 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 WELLS will offset losses from the drop in WELLS's long position.The idea behind Merck Company and WELLS FARGO NEW 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.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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