Correlation Between Merck and Walden Smid
Can any of the company-specific risk be diversified away by investing in both Merck and Walden Smid 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 Walden Smid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Walden Smid Cap, you can compare the effects of market volatilities on Merck and Walden Smid 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 Walden Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Walden Smid.
Diversification Opportunities for Merck and Walden Smid
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Walden is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Walden Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Smid 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 Walden Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Smid Cap has no effect on the direction of Merck i.e., Merck and Walden Smid go up and down completely randomly.
Pair Corralation between Merck and Walden Smid
Considering the 90-day investment horizon Merck Company is expected to under-perform the Walden Smid. In addition to that, Merck is 1.39 times more volatile than Walden Smid Cap. It trades about -0.01 of its total potential returns per unit of risk. Walden Smid Cap is currently generating about 0.08 per unit of volatility. If you would invest 1,991 in Walden Smid Cap on August 28, 2024 and sell it today you would earn a total of 726.00 from holding Walden Smid Cap or generate 36.46% 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. Walden Smid Cap
Performance |
| Timeline |
| Merck Company |
| Walden Smid Cap |
Merck and Walden Smid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Walden Smid
The main advantage of trading using opposite Merck and Walden Smid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Walden Smid 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 Walden Smid will offset losses from the drop in Walden Smid's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Walden Smid vs. Calvert Small Cap | Walden Smid vs. Calvert International Equity | Walden Smid vs. Champlain Mid Cap | Walden Smid vs. Aquagold International |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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