Correlation Between Merck and Brown Advisory

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

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

Diversification Opportunities for Merck and Brown Advisory

-0.2

Correlation Coefficient

Merck  Brown Advisory

Good diversification

The 3 months correlation between Merck and Brown is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Brown Advisory Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Growth 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 Brown Advisory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Advisory Growth has no effect on the direction of Merck i.e., Merck and Brown Advisory go up and down completely randomly.

Pair Corralation between Merck and Brown Advisory

Considering the 90-day investment horizon Merck Company is expected to under-perform the Brown Advisory. In addition to that, Merck is 1.55 times more volatile than Brown Advisory Growth. It trades about -0.1 of its total potential returns per unit of risk. Brown Advisory Growth is currently generating about -0.09 per unit of volatility. If you would invest  1,766  in Brown Advisory Growth on December 27, 2024 and sell it today you would lose (114.00) from holding Brown Advisory Growth or give up 6.46% of portfolio value over 90 days.

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

Merck Company  vs.  Brown Advisory Growth

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.

Brown Advisory Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Advisory Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Merck and Brown Advisory

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

The idea behind Merck Company and Brown Advisory Growth 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..