Correlation Between Merck and Washington Business
Can any of the company-specific risk be diversified away by investing in both Merck and Washington Business 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 Washington Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Washington Business Bank, you can compare the effects of market volatilities on Merck and Washington Business 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 Washington Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Washington Business.
Diversification Opportunities for Merck and Washington Business
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Washington is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Washington Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Business Bank 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 Washington Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Business Bank has no effect on the direction of Merck i.e., Merck and Washington Business go up and down completely randomly.
Pair Corralation between Merck and Washington Business
If you would invest 3,600 in Washington Business Bank on November 5, 2024 and sell it today you would earn a total of 0.00 from holding Washington Business Bank or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 5.0% |
| Values | Daily Returns |
Merck Company vs. Washington Business Bank
Performance |
| Timeline |
| Merck Company |
| Washington Business Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Merck and Washington Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Washington Business
The main advantage of trading using opposite Merck and Washington Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Washington Business 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 Washington Business will offset losses from the drop in Washington Business' long position.| Merck vs. Agilent Technologies | Merck vs. Equillium | Merck vs. 23Andme Holding Co | Merck vs. DiaMedica Therapeutics |
| Washington Business vs. National Capital Bank | Washington Business vs. Community Heritage Financial | Washington Business vs. Citizens Financial Corp | Washington Business vs. Bank of Idaho |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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