Correlation Between Merck and IShares ESG
Can any of the company-specific risk be diversified away by investing in both Merck and IShares ESG 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 IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and iShares ESG Screened, you can compare the effects of market volatilities on Merck and IShares ESG 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 IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and IShares ESG.
Diversification Opportunities for Merck and IShares ESG
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and IShares is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of Merck i.e., Merck and IShares ESG go up and down completely randomly.
Pair Corralation between Merck and IShares ESG
Considering the 90-day investment horizon Merck Company is expected to under-perform the IShares ESG. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.23 times less risky than IShares ESG. The stock trades about -0.01 of its potential returns per unit of risk. The iShares ESG Screened is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,137 in iShares ESG Screened on August 30, 2024 and sell it today you would earn a total of 357.00 from holding iShares ESG Screened or generate 8.63% 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. iShares ESG Screened
Performance |
| Timeline |
| Merck Company |
| iShares ESG Screened |
Merck and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and IShares ESG
The main advantage of trading using opposite Merck and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, IShares ESG 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 IShares ESG will offset losses from the drop in IShares ESG's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
| IShares ESG vs. iShares ESG Screened | IShares ESG vs. iShares ESG Screened | IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG Advanced |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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