Correlation Between Merck and Cavanal Hill

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

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

Diversification Opportunities for Merck and Cavanal Hill

0.0

Correlation Coefficient

Merck  Cavanal Hill

Pay attention - limited upside

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

Pair Corralation between Merck and Cavanal Hill

If you would invest  100.00  in Cavanal Hill Funds on December 5, 2024 and sell it today you would earn a total of  0.00  from holding Cavanal Hill Funds or generate 0.0% return on investment over 90 days.

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

Merck Company  vs.  Cavanal Hill Funds

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 abnormal 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.

Cavanal Hill Funds

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Merck and Cavanal Hill

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

The idea behind Merck Company and Cavanal Hill Funds 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.