Correlation Between ECHO INVESTMENT and Merck

Can any of the company-specific risk be diversified away by investing in both ECHO INVESTMENT 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 ECHO INVESTMENT and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECHO INVESTMENT ZY and Merck Company, you can compare the effects of market volatilities on ECHO INVESTMENT 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 ECHO INVESTMENT with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and Merck.

Diversification Opportunities for ECHO INVESTMENT and Merck

-0.55

Correlation Coefficient

ECHO INVESTMENT  Merck

Excellent diversification

The 3 months correlation between ECHO and Merck is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and ECHO INVESTMENT 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 ECHO INVESTMENT ZY 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 ECHO INVESTMENT i.e., ECHO INVESTMENT and Merck go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and Merck

Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to generate 1.38 times more return on investment than Merck. However, ECHO INVESTMENT is 1.38 times more volatile than Merck Company. It trades about 0.11 of its potential returns per unit of risk. Merck Company is currently generating about -0.15 per unit of risk. If you would invest  96.00  in ECHO INVESTMENT ZY on September 15, 2024 and sell it today you would earn a total of  15.00  from holding ECHO INVESTMENT ZY or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

ECHO INVESTMENT ZY  vs.  Merck Company

ECHO INVESTMENT ZY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT reported solid returns over the last few months and may actually be approaching a breakup point.

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ECHO INVESTMENT and Merck

The main advantage of trading using opposite ECHO INVESTMENT and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECHO INVESTMENT 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.

The idea behind ECHO INVESTMENT ZY and Merck Company 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.