Correlation Between Merck and WisdomTree Managed
Can any of the company-specific risk be diversified away by investing in both Merck and WisdomTree Managed 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 Managed 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 Managed Futures, you can compare the effects of market volatilities on Merck and WisdomTree Managed 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 Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and WisdomTree Managed.
Diversification Opportunities for Merck and WisdomTree Managed
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and WisdomTree is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and WisdomTree Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Managed 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 Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Managed has no effect on the direction of Merck i.e., Merck and WisdomTree Managed go up and down completely randomly.
Pair Corralation between Merck and WisdomTree Managed
Considering the 90-day investment horizon Merck Company is expected to under-perform the WisdomTree Managed. In addition to that, Merck is 2.31 times more volatile than WisdomTree Managed Futures. It trades about 0.0 of its total potential returns per unit of risk. WisdomTree Managed Futures is currently generating about 0.05 per unit of volatility. If you would invest 3,250 in WisdomTree Managed Futures on August 31, 2024 and sell it today you would earn a total of 354.00 from holding WisdomTree Managed Futures or generate 10.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. WisdomTree Managed Futures
Performance |
| Timeline |
| Merck Company |
| WisdomTree Managed |
Merck and WisdomTree Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and WisdomTree Managed
The main advantage of trading using opposite Merck and WisdomTree Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, WisdomTree Managed 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 Managed will offset losses from the drop in WisdomTree Managed's long position.The idea behind Merck Company and WisdomTree Managed Futures 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.| WisdomTree Managed vs. First Trust Managed | WisdomTree Managed vs. iMGP DBi Managed | WisdomTree Managed vs. First Trust LongShort | WisdomTree Managed vs. WisdomTree CBOE SP |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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