Correlation Between Merck and WisdomTree Trust
Can any of the company-specific risk be diversified away by investing in both Merck and WisdomTree Trust 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 WisdomTree Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and WisdomTree Trust , you can compare the effects of market volatilities on Merck and WisdomTree Trust 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 WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and WisdomTree Trust.
Diversification Opportunities for Merck and WisdomTree Trust
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and WisdomTree is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust 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 WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of Merck i.e., Merck and WisdomTree Trust go up and down completely randomly.
Pair Corralation between Merck and WisdomTree Trust
Considering the 90-day investment horizon Merck Company is expected to under-perform the WisdomTree Trust. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.13 times less risky than WisdomTree Trust. The stock trades about -0.1 of its potential returns per unit of risk. The WisdomTree Trust is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,051 in WisdomTree Trust on August 28, 2024 and sell it today you would earn a total of 158.00 from holding WisdomTree Trust or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. WisdomTree Trust
Performance |
| Timeline |
| Merck Company |
| WisdomTree Trust |
Merck and WisdomTree Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and WisdomTree Trust
The main advantage of trading using opposite Merck and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, WisdomTree Trust 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 WisdomTree Trust will offset losses from the drop in WisdomTree Trust's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| WisdomTree Trust vs. Invesco DWA Utilities | WisdomTree Trust vs. Invesco Dynamic Large | WisdomTree Trust vs. Invesco Dynamic Large | WisdomTree Trust vs. HUMANA INC |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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