Correlation Between Merck and Zimmer Energy
Can any of the company-specific risk be diversified away by investing in both Merck and Zimmer Energy 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 Zimmer Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Zimmer Energy Transition, you can compare the effects of market volatilities on Merck and Zimmer Energy 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 Zimmer Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Zimmer Energy.
Diversification Opportunities for Merck and Zimmer Energy
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Zimmer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Zimmer Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Energy Transition 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 Zimmer Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Energy Transition has no effect on the direction of Merck i.e., Merck and Zimmer Energy go up and down completely randomly.
Pair Corralation between Merck and Zimmer Energy
If you would invest (100.00) in Zimmer Energy Transition on November 28, 2024 and sell it today you would earn a total of 100.00 from holding Zimmer Energy Transition or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Merck Company vs. Zimmer Energy Transition
Performance |
| Timeline |
| Merck Company |
| Zimmer Energy Transition |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Merck and Zimmer Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Zimmer Energy
The main advantage of trading using opposite Merck and Zimmer Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Zimmer Energy 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 Zimmer Energy will offset losses from the drop in Zimmer Energy's long position.The idea behind Merck Company and Zimmer Energy Transition 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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