Correlation Between Merck and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both Merck and Innovator Equity 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 Innovator Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Innovator Equity Accelerated, you can compare the effects of market volatilities on Merck and Innovator Equity 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 Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Innovator Equity.
Diversification Opportunities for Merck and Innovator Equity
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and Innovator is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Innovator Equity Accelerated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Acc 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Acc has no effect on the direction of Merck i.e., Merck and Innovator Equity go up and down completely randomly.
Pair Corralation between Merck and Innovator Equity
Considering the 90-day investment horizon Merck Company is expected to under-perform the Innovator Equity. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.41 times less risky than Innovator Equity. The stock trades about -0.31 of its potential returns per unit of risk. The Innovator Equity Accelerated is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 3,315 in Innovator Equity Accelerated on January 13, 2025 and sell it today you would lose (158.00) from holding Innovator Equity Accelerated or give up 4.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Innovator Equity Accelerated
Performance |
| Timeline |
| Merck Company |
| Innovator Equity Acc |
Merck and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Innovator Equity
The main advantage of trading using opposite Merck and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Innovator Equity 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 Innovator Equity will offset losses from the drop in Innovator Equity's long position.| Merck vs. Agilent Technologies | Merck vs. Equillium | Merck vs. DiaMedica Therapeutics | Merck vs. Valneva SE ADR |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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