Correlation Between Merck and VictoryShares Dividend
Can any of the company-specific risk be diversified away by investing in both Merck and VictoryShares Dividend 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 VictoryShares Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and VictoryShares Dividend Accelerator, you can compare the effects of market volatilities on Merck and VictoryShares Dividend 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 VictoryShares Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and VictoryShares Dividend.
Diversification Opportunities for Merck and VictoryShares Dividend
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Merck and VictoryShares is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and VictoryShares Dividend Acceler in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares Dividend 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 VictoryShares Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares Dividend has no effect on the direction of Merck i.e., Merck and VictoryShares Dividend go up and down completely randomly.
Pair Corralation between Merck and VictoryShares Dividend
Considering the 90-day investment horizon Merck Company is expected to under-perform the VictoryShares Dividend. In addition to that, Merck is 4.16 times more volatile than VictoryShares Dividend Accelerator. It trades about -0.12 of its total potential returns per unit of risk. VictoryShares Dividend Accelerator is currently generating about -0.06 per unit of volatility. If you would invest 5,303 in VictoryShares Dividend Accelerator on November 28, 2024 and sell it today you would lose (43.00) from holding VictoryShares Dividend Accelerator or give up 0.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. VictoryShares Dividend Acceler
Performance |
| Timeline |
| Merck Company |
| VictoryShares Dividend |
Merck and VictoryShares Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and VictoryShares Dividend
The main advantage of trading using opposite Merck and VictoryShares Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, VictoryShares Dividend 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 VictoryShares Dividend will offset losses from the drop in VictoryShares Dividend's long position.The idea behind Merck Company and VictoryShares Dividend Accelerator 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.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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