Correlation Between Merck and Themes Cash

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Can any of the company-specific risk be diversified away by investing in both Merck and Themes Cash at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Merck and Themes Cash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Themes Cash Flow, you can compare the effects of market volatilities on Merck and Themes Cash 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 Themes Cash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Themes Cash.

Diversification Opportunities for Merck and Themes Cash

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Merck and Themes is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Themes Cash Flow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Cash Flow 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 Themes Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Cash Flow has no effect on the direction of Merck i.e., Merck and Themes Cash go up and down completely randomly.

Pair Corralation between Merck and Themes Cash

Considering the 90-day investment horizon Merck Company is expected to under-perform the Themes Cash. In addition to that, Merck is 1.25 times more volatile than Themes Cash Flow. It trades about -0.02 of its total potential returns per unit of risk. Themes Cash Flow is currently generating about 0.26 per unit of volatility. If you would invest  3,023  in Themes Cash Flow on September 1, 2024 and sell it today you would earn a total of  183.00  from holding Themes Cash Flow or generate 6.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

Merck Company  vs.  Themes Cash Flow

 Performance 
       Timeline  
Merck Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
Themes Cash Flow 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Themes Cash Flow are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Themes Cash may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Merck and Themes Cash Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Themes Cash

The main advantage of trading using opposite Merck and Themes Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Themes Cash 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 Themes Cash will offset losses from the drop in Themes Cash's long position.
The idea behind Merck Company and Themes Cash Flow 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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