Correlation Between Merck and Ault Disruptive

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

By analyzing existing cross correlation between Merck Company and Ault Disruptive Technologies, you can compare the effects of market volatilities on Merck and Ault Disruptive 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 Ault Disruptive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Ault Disruptive.

Diversification Opportunities for Merck and Ault Disruptive

0.87

Correlation Coefficient

Merck  Ault Disruptive

Very poor diversification

The 3 months correlation between Merck and Ault is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ault Disruptive Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ault Disruptive Tech 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 Ault Disruptive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ault Disruptive Tech has no effect on the direction of Merck i.e., Merck and Ault Disruptive go up and down completely randomly.

Pair Corralation between Merck and Ault Disruptive

Considering the 90-day investment horizon Merck Company is expected to under-perform the Ault Disruptive. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 15.77 times less risky than Ault Disruptive. The stock trades about -0.08 of its potential returns per unit of risk. The Ault Disruptive Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,269  in Ault Disruptive Technologies on September 20, 2024 and sell it today you would lose (129.00) from holding Ault Disruptive Technologies or give up 10.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	71.86%
Values	Daily Returns

Merck Company  vs.  Ault Disruptive Technologies

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ault Disruptive Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ault Disruptive Technologies 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Merck and Ault Disruptive

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

The idea behind Merck Company and Ault Disruptive Technologies 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.