Correlation Between ScanSource and Merck
Can any of the company-specific risk be diversified away by investing in both ScanSource 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 ScanSource and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Merck Company, you can compare the effects of market volatilities on ScanSource 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 ScanSource with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Merck.
Diversification Opportunities for ScanSource and Merck
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ScanSource and Merck is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and ScanSource 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 ScanSource 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 ScanSource i.e., ScanSource and Merck go up and down completely randomly.
Pair Corralation between ScanSource and Merck
Assuming the 90 days horizon ScanSource is expected to generate 1.29 times more return on investment than Merck. However, ScanSource is 1.29 times more volatile than Merck Company. It trades about 0.05 of its potential returns per unit of risk. Merck Company is currently generating about -0.02 per unit of risk. If you would invest 3,260 in ScanSource on October 28, 2024 and sell it today you would earn a total of 1,580 from holding ScanSource or generate 48.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ScanSource vs. Merck Company
Performance |
| Timeline |
| ScanSource |
| Merck Company |
ScanSource and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Merck
The main advantage of trading using opposite ScanSource and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource 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.| ScanSource vs. Geely Automobile Holdings | ScanSource vs. Chengdu PUTIAN Telecommunications | ScanSource vs. Mitsui Chemicals | ScanSource vs. Carsales |
| Merck vs. STMicroelectronics NV | Merck vs. KIMBALL ELECTRONICS | Merck vs. ARROW ELECTRONICS | Merck vs. Nucletron Electronic Aktiengesellschaft |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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