Correlation Between Dupont De and Merrill Lynch

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

By analyzing existing cross correlation between Dupont De Nemours and Merrill Lynch Capital, you can compare the effects of market volatilities on Dupont De and Merrill Lynch 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 Dupont De with a short position of Merrill Lynch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Merrill Lynch.

Diversification Opportunities for Dupont De and Merrill Lynch

0.17

Correlation Coefficient

Dupont De  Merrill Lynch

Average diversification

The 3 months correlation between Dupont and Merrill is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Merrill Lynch Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch Capital and Dupont De 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 Dupont De Nemours are associated (or correlated) with Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch Capital has no effect on the direction of Dupont De i.e., Dupont De and Merrill Lynch go up and down completely randomly.

Pair Corralation between Dupont De and Merrill Lynch

Allowing for the 90-day total investment horizon Dupont De is expected to generate 1.64 times less return on investment than Merrill Lynch. In addition to that, Dupont De is 2.87 times more volatile than Merrill Lynch Capital. It trades about 0.01 of its total potential returns per unit of risk. Merrill Lynch Capital is currently generating about 0.06 per unit of volatility. If you would invest  2,544  in Merrill Lynch Capital on December 21, 2024 and sell it today you would earn a total of  50.00  from holding Merrill Lynch Capital or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dupont De Nemours  vs.  Merrill Lynch Capital

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Merrill Lynch Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merrill Lynch Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Merrill Lynch is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dupont De and Merrill Lynch

The main advantage of trading using opposite Dupont De and Merrill Lynch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, Merrill Lynch 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 Merrill Lynch will offset losses from the drop in Merrill Lynch's long position.

The idea behind Dupont De Nemours and Merrill Lynch Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.