Correlation Between GENERAL and Merck
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By analyzing existing cross correlation between GENERAL ELEC CAP and Merck Company, you can compare the effects of market volatilities on GENERAL 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 GENERAL with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and Merck.
Diversification Opportunities for GENERAL and Merck
Modest diversification
The 3 months correlation between GENERAL and Merck is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and GENERAL 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 GENERAL ELEC CAP 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 GENERAL i.e., GENERAL and Merck go up and down completely randomly.
Pair Corralation between GENERAL and Merck
Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to under-perform the Merck. In addition to that, GENERAL is 1.57 times more volatile than Merck Company. It trades about -0.03 of its total potential returns per unit of risk. Merck Company is currently generating about -0.05 per unit of volatility. If you would invest 10,483 in Merck Company on August 31, 2024 and sell it today you would lose (171.00) from holding Merck Company or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
GENERAL ELEC CAP vs. Merck Company
Performance |
| Timeline |
| GENERAL ELEC CAP |
| Merck Company |
GENERAL and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GENERAL and Merck
The main advantage of trading using opposite GENERAL and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GENERAL 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.| GENERAL vs. AEP TEX INC | GENERAL vs. US BANK NATIONAL | GENERAL vs. American Express | GENERAL vs. Chevron Corp |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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