Correlation Between Victory Integrity and Merck

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

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

Diversification Opportunities for Victory Integrity and Merck

-0.06

Correlation Coefficient

Victory Integrity  Merck

Good diversification

The 3 months correlation between Victory and Merck is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Victory Integrity Smallmid Cap and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Victory Integrity 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 Victory Integrity Smallmid 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 Victory Integrity i.e., Victory Integrity and Merck go up and down completely randomly.

Pair Corralation between Victory Integrity and Merck

Assuming the 90 days horizon Victory Integrity Smallmid Cap is expected to generate 0.6 times more return on investment than Merck. However, Victory Integrity Smallmid Cap is 1.67 times less risky than Merck. It trades about -0.07 of its potential returns per unit of risk. Merck Company is currently generating about -0.08 per unit of risk. If you would invest  2,126  in Victory Integrity Smallmid Cap on December 28, 2024 and sell it today you would lose (100.00) from holding Victory Integrity Smallmid Cap or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Victory Integrity Smallmid Cap  vs.  Merck Company

Victory Integrity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Integrity Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Victory Integrity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Victory Integrity and Merck

The main advantage of trading using opposite Victory Integrity and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory Integrity 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 Victory Integrity Smallmid Cap 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.