Correlation Between Merck and SPDR Kensho
Can any of the company-specific risk be diversified away by investing in both Merck and SPDR Kensho 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 SPDR Kensho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and SPDR Kensho Future, you can compare the effects of market volatilities on Merck and SPDR Kensho 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 SPDR Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SPDR Kensho.
Diversification Opportunities for Merck and SPDR Kensho
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and SPDR is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future 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 SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Future has no effect on the direction of Merck i.e., Merck and SPDR Kensho go up and down completely randomly.
Pair Corralation between Merck and SPDR Kensho
Considering the 90-day investment horizon Merck Company is expected to under-perform the SPDR Kensho. In addition to that, Merck is 1.19 times more volatile than SPDR Kensho Future. It trades about 0.0 of its total potential returns per unit of risk. SPDR Kensho Future is currently generating about 0.1 per unit of volatility. If you would invest 4,813 in SPDR Kensho Future on August 31, 2024 and sell it today you would earn a total of 2,104 from holding SPDR Kensho Future or generate 43.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Merck Company vs. SPDR Kensho Future
Performance |
| Timeline |
| Merck Company |
| SPDR Kensho Future |
Merck and SPDR Kensho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SPDR Kensho
The main advantage of trading using opposite Merck and SPDR Kensho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SPDR Kensho 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 SPDR Kensho will offset losses from the drop in SPDR Kensho's long position.The idea behind Merck Company and SPDR Kensho Future 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.| SPDR Kensho vs. SPDR STOXX Europe | SPDR Kensho vs. SPDR Bloomberg Barclays | SPDR Kensho vs. SPDR Kensho Intelligent | SPDR Kensho vs. SPDR SP Kensho |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |