Correlation Between Merck and Blackrock Collegeadvantage

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

By analyzing existing cross correlation between Merck Company and Blackrock Collegeadvantage 529, you can compare the effects of market volatilities on Merck and Blackrock Collegeadvantage 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 Blackrock Collegeadvantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Blackrock Collegeadvantage.

Diversification Opportunities for Merck and Blackrock Collegeadvantage

-0.45

Correlation Coefficient

Merck  Blackrock Collegeadvantage

Very good diversification

The 3 months correlation between Merck and Blackrock is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Blackrock Collegeadvantage 529 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Collegeadvantage 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 Blackrock Collegeadvantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Collegeadvantage has no effect on the direction of Merck i.e., Merck and Blackrock Collegeadvantage go up and down completely randomly.

Pair Corralation between Merck and Blackrock Collegeadvantage

Considering the 90-day investment horizon Merck Company is expected to under-perform the Blackrock Collegeadvantage. In addition to that, Merck is 2.32 times more volatile than Blackrock Collegeadvantage 529. It trades about -0.07 of its total potential returns per unit of risk. Blackrock Collegeadvantage 529 is currently generating about 0.0 per unit of volatility. If you would invest  1,597  in Blackrock Collegeadvantage 529 on December 29, 2024 and sell it today you would lose (2.00) from holding Blackrock Collegeadvantage 529 or give up 0.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Merck Company  vs.  Blackrock Collegeadvantage 529

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.

Blackrock Collegeadvantage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Collegeadvantage 529 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock Collegeadvantage 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 Blackrock Collegeadvantage

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

The idea behind Merck Company and Blackrock Collegeadvantage 529 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.