Correlation Between Merck and BetterU Education

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

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

Diversification Opportunities for Merck and BetterU Education

0.0

Correlation Coefficient

Merck  BetterU Education

Pay attention - limited upside

The 3 months correlation between Merck and BetterU is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and betterU Education Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on betterU Education Corp and Merck 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 Merck Company are associated (or correlated) with BetterU Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of betterU Education Corp has no effect on the direction of Merck i.e., Merck and BetterU Education go up and down completely randomly.

Pair Corralation between Merck and BetterU Education

If you would invest  0.55  in betterU Education Corp on October 11, 2024 and sell it today you would earn a total of  0.00  from holding betterU Education Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.87%
Values	Daily Returns

Merck Company  vs.  betterU Education Corp

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 latest uncertain performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

betterU Education Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Merck and BetterU Education

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

The idea behind Merck Company and betterU Education Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.