Correlation Between WT OFFSHORE and Merck
Can any of the company-specific risk be diversified away by investing in both WT OFFSHORE 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 WT OFFSHORE and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WT OFFSHORE and Merck Company, you can compare the effects of market volatilities on WT OFFSHORE 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 WT OFFSHORE with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of WT OFFSHORE and Merck.
Diversification Opportunities for WT OFFSHORE and Merck
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between UWV and Merck is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding WT OFFSHORE and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and WT OFFSHORE 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 WT OFFSHORE 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 WT OFFSHORE i.e., WT OFFSHORE and Merck go up and down completely randomly.
Pair Corralation between WT OFFSHORE and Merck
Assuming the 90 days trading horizon WT OFFSHORE is expected to under-perform the Merck. In addition to that, WT OFFSHORE is 1.68 times more volatile than Merck Company. It trades about -0.26 of its total potential returns per unit of risk. Merck Company is currently generating about -0.3 per unit of volatility. If you would invest 15,270 in Merck Company on September 12, 2024 and sell it today you would lose (1,195) from holding Merck Company or give up 7.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
WT OFFSHORE vs. Merck Company
Performance |
| Timeline |
| WT OFFSHORE |
| Merck Company |
WT OFFSHORE and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WT OFFSHORE and Merck
The main advantage of trading using opposite WT OFFSHORE and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT OFFSHORE 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.| WT OFFSHORE vs. Apple Inc | WT OFFSHORE vs. Apple Inc | WT OFFSHORE vs. Apple Inc | WT OFFSHORE vs. Apple Inc |
| Merck vs. PUBLIC STORAGE PRFO | Merck vs. Associated British Foods | Merck vs. SENECA FOODS A | Merck vs. Food Life Companies |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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