Correlation Between PennyMac Finl and Merck
Can any of the company-specific risk be diversified away by investing in both PennyMac Finl and Merck 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 PennyMac Finl and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennyMac Finl Svcs and Merck Company, you can compare the effects of market volatilities on PennyMac Finl and Merck 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 PennyMac Finl with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennyMac Finl and Merck.
Diversification Opportunities for PennyMac Finl and Merck
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PennyMac and Merck is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PennyMac Finl Svcs and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and PennyMac Finl 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 PennyMac Finl Svcs are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of PennyMac Finl i.e., PennyMac Finl and Merck go up and down completely randomly.
Pair Corralation between PennyMac Finl and Merck
Given the investment horizon of 90 days PennyMac Finl Svcs is expected to generate 1.51 times more return on investment than Merck. However, PennyMac Finl is 1.51 times more volatile than Merck Company. It trades about 0.06 of its potential returns per unit of risk. Merck Company is currently generating about 0.0 per unit of risk. If you would invest 6,482 in PennyMac Finl Svcs on October 25, 2024 and sell it today you would earn a total of 4,305 from holding PennyMac Finl Svcs or generate 66.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennyMac Finl Svcs vs. Merck Company
Performance |
| Timeline |
| PennyMac Finl Svcs |
| Merck Company |
PennyMac Finl and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennyMac Finl and Merck
The main advantage of trading using opposite PennyMac Finl and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennyMac Finl position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| PennyMac Finl vs. Guild Holdings Co | PennyMac Finl vs. Security National Financial | PennyMac Finl vs. Encore Capital Group | PennyMac Finl vs. Mr Cooper Group |
| Merck vs. Collegium Pharmaceutical | Merck vs. Phibro Animal Health | Merck vs. ANI Pharmaceuticals | Merck vs. Procaps Group SA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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