Correlation Between Merck and Power Digital
Can any of the company-specific risk be diversified away by investing in both Merck and Power Digital 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 Power Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Power Digital Infrastructure, you can compare the effects of market volatilities on Merck and Power Digital 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 Power Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Power Digital.
Diversification Opportunities for Merck and Power Digital
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Power is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Power Digital Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Digital Infras 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 Power Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Digital Infras has no effect on the direction of Merck i.e., Merck and Power Digital go up and down completely randomly.
Pair Corralation between Merck and Power Digital
If you would invest 1,043 in Power Digital Infrastructure on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Power Digital Infrastructure or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Merck Company vs. Power Digital Infrastructure
Performance |
| Timeline |
| Merck Company |
| Power Digital Infras |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Power Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Power Digital
The main advantage of trading using opposite Merck and Power Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Power Digital 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 Power Digital will offset losses from the drop in Power Digital's long position.The idea behind Merck Company and Power Digital Infrastructure 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.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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