Correlation Between Merck and SPDR Morgan
Can any of the company-specific risk be diversified away by investing in both Merck and SPDR Morgan 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 Morgan 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 Morgan Stanley, you can compare the effects of market volatilities on Merck and SPDR Morgan 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 Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SPDR Morgan.
Diversification Opportunities for Merck and SPDR Morgan
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and SPDR is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley 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 Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of Merck i.e., Merck and SPDR Morgan go up and down completely randomly.
Pair Corralation between Merck and SPDR Morgan
Considering the 90-day investment horizon Merck Company is expected to under-perform the SPDR Morgan. In addition to that, Merck is 1.14 times more volatile than SPDR Morgan Stanley. It trades about -0.01 of its total potential returns per unit of risk. SPDR Morgan Stanley is currently generating about 0.03 per unit of volatility. If you would invest 20,249 in SPDR Morgan Stanley on August 30, 2024 and sell it today you would earn a total of 135.00 from holding SPDR Morgan Stanley or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Merck Company vs. SPDR Morgan Stanley
Performance |
| Timeline |
| Merck Company |
| SPDR Morgan Stanley |
Merck and SPDR Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SPDR Morgan
The main advantage of trading using opposite Merck and SPDR Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SPDR Morgan 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 Morgan will offset losses from the drop in SPDR Morgan's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
| SPDR Morgan vs. SPDR FactSet Innovative | SPDR Morgan vs. SPDR SP Software | SPDR Morgan vs. SPDR SP Health | SPDR Morgan vs. iShares Expanded Tech |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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