Correlation Between Merck and Vanguard Scottsdale
Can any of the company-specific risk be diversified away by investing in both Merck and Vanguard Scottsdale 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 Scottsdale 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 Scottsdale Funds, you can compare the effects of market volatilities on Merck and Vanguard Scottsdale 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 Scottsdale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Vanguard Scottsdale.
Diversification Opportunities for Merck and Vanguard Scottsdale
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Vanguard is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Vanguard Scottsdale Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Scottsdale Funds 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 Scottsdale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Scottsdale Funds has no effect on the direction of Merck i.e., Merck and Vanguard Scottsdale go up and down completely randomly.
Pair Corralation between Merck and Vanguard Scottsdale
Considering the 90-day investment horizon Merck Company is expected to under-perform the Vanguard Scottsdale. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.09 times less risky than Vanguard Scottsdale. The stock trades about -0.15 of its potential returns per unit of risk. The Vanguard Scottsdale Funds is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 28,220 in Vanguard Scottsdale Funds on August 31, 2024 and sell it today you would earn a total of 3,067 from holding Vanguard Scottsdale Funds or generate 10.87% 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 Scottsdale Funds
Performance |
| Timeline |
| Merck Company |
| Vanguard Scottsdale Funds |
Merck and Vanguard Scottsdale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Vanguard Scottsdale
The main advantage of trading using opposite Merck and Vanguard Scottsdale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Vanguard Scottsdale 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 Scottsdale will offset losses from the drop in Vanguard Scottsdale's long position.The idea behind Merck Company and Vanguard Scottsdale Funds 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 Scottsdale vs. Vanguard FTSE Canadian | Vanguard Scottsdale vs. Vanguard Funds Public | Vanguard Scottsdale vs. Vanguard Funds Public | Vanguard Scottsdale vs. Vanguard Funds Public |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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