Correlation Between Merck and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Merck and Vanguard Small 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 Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Vanguard Small Cap Value, you can compare the effects of market volatilities on Merck and Vanguard Small 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 Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Vanguard Small.
Diversification Opportunities for Merck and Vanguard Small
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Vanguard is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Merck i.e., Merck and Vanguard Small go up and down completely randomly.
Pair Corralation between Merck and Vanguard Small
Considering the 90-day investment horizon Merck Company is expected to under-perform the Vanguard Small. In addition to that, Merck is 1.06 times more volatile than Vanguard Small Cap Value. It trades about -0.16 of its total potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.2 per unit of volatility. If you would invest 19,989 in Vanguard Small Cap Value on August 24, 2024 and sell it today you would earn a total of 1,131 from holding Vanguard Small Cap Value or generate 5.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Merck Company |
| Vanguard Small Cap |
Merck and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Vanguard Small
The main advantage of trading using opposite Merck and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Vanguard Small 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 Vanguard Small will offset losses from the drop in Vanguard Small's long position.The idea behind Merck Company and Vanguard Small Cap Value 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.| Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Small Cap Growth | Vanguard Small vs. Vanguard Value Index | Vanguard Small vs. Vanguard Small Cap Index |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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