Correlation Between Merck and Vanguard International
Can any of the company-specific risk be diversified away by investing in both Merck and Vanguard International 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 International 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 International Dividend, you can compare the effects of market volatilities on Merck and Vanguard International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Vanguard International.
Diversification Opportunities for Merck and Vanguard International
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Vanguard International Dividen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of Merck i.e., Merck and Vanguard International go up and down completely randomly.
Pair Corralation between Merck and Vanguard International
Considering the 90-day investment horizon Merck Company is expected to generate 1.95 times more return on investment than Vanguard International. However, Merck is 1.95 times more volatile than Vanguard International Dividend. It trades about -0.01 of its potential returns per unit of risk. Vanguard International Dividend is currently generating about -0.14 per unit of risk. If you would invest 10,373 in Merck Company on August 30, 2024 and sell it today you would lose (61.00) from holding Merck Company or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Vanguard International Dividen
Performance |
| Timeline |
| Merck Company |
| Vanguard International |
Merck and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Vanguard International
The main advantage of trading using opposite Merck and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Vanguard International 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 International will offset losses from the drop in Vanguard International's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |