Correlation Between Merrill Lynch and Vanguard Total

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

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

Diversification Opportunities for Merrill Lynch and Vanguard Total

0.3

Correlation Coefficient

Merrill Lynch  Vanguard Total

Weak diversification

The 3 months correlation between Merrill and Vanguard is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Merrill Lynch and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Merrill Lynch 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 Merrill Lynch are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Merrill Lynch i.e., Merrill Lynch and Vanguard Total go up and down completely randomly.

Pair Corralation between Merrill Lynch and Vanguard Total

If you would invest (100.00) in Merrill Lynch on October 1, 2024 and sell it today you would earn a total of  100.00  from holding Merrill Lynch or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Merrill Lynch  vs.  Vanguard Total Stock

Merrill Lynch

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrill Lynch has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Merrill Lynch is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Total Stock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Merrill Lynch and Vanguard Total

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

The idea behind Merrill Lynch and Vanguard Total Stock 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..