Correlation Between Merck and Baillie Gifford

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

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

Diversification Opportunities for Merck and Baillie Gifford

0.0

Correlation Coefficient

Merck  Baillie Gifford

Pay attention - limited upside

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

Pair Corralation between Merck and Baillie Gifford

Considering the 90-day investment horizon Merck is expected to generate 23.82 times less return on investment than Baillie Gifford. In addition to that, Merck is 1.35 times more volatile than Baillie Gifford Global. It trades about 0.0 of its total potential returns per unit of risk. Baillie Gifford Global is currently generating about 0.04 per unit of volatility. If you would invest  1,528  in Baillie Gifford Global on October 26, 2024 and sell it today you would earn a total of  205.00  from holding Baillie Gifford Global or generate 13.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	70.45%
Values	Daily Returns

Merck Company  vs.  Baillie Gifford Global

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 latest conflicting 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.

Baillie Gifford Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baillie Gifford Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Baillie Gifford 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 Baillie Gifford

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

The idea behind Merck Company and Baillie Gifford Global 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.