Correlation Between Merck and Voip PalCom
Can any of the company-specific risk be diversified away by investing in both Merck and Voip PalCom 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 Voip PalCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Voip PalCom, you can compare the effects of market volatilities on Merck and Voip PalCom 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 Voip PalCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Voip PalCom.
Diversification Opportunities for Merck and Voip PalCom
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merck and Voip is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Voip PalCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voip PalCom 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 Voip PalCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voip PalCom has no effect on the direction of Merck i.e., Merck and Voip PalCom go up and down completely randomly.
Pair Corralation between Merck and Voip PalCom
Considering the 90-day investment horizon Merck Company is expected to generate 0.13 times more return on investment than Voip PalCom. However, Merck Company is 7.97 times less risky than Voip PalCom. It trades about 0.01 of its potential returns per unit of risk. Voip PalCom is currently generating about -0.02 per unit of risk. If you would invest 10,187 in Merck Company on September 1, 2024 and sell it today you would lose (23.00) from holding Merck Company or give up 0.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Voip PalCom
Performance |
| Timeline |
| Merck Company |
| Voip PalCom |
Merck and Voip PalCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Voip PalCom
The main advantage of trading using opposite Merck and Voip PalCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Voip PalCom 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 Voip PalCom will offset losses from the drop in Voip PalCom's long position.The idea behind Merck Company and Voip PalCom 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.| Voip PalCom vs. Crexendo | Voip PalCom vs. FingerMotion | Voip PalCom vs. Tele2 AB | Voip PalCom vs. KORE Group Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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