Correlation Between Merck and Professionally Managed
Can any of the company-specific risk be diversified away by investing in both Merck and Professionally Managed 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 Professionally Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Professionally Managed Portfolios, you can compare the effects of market volatilities on Merck and Professionally Managed 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 Professionally Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Professionally Managed.
Diversification Opportunities for Merck and Professionally Managed
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Professionally is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Professionally Managed Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professionally Managed 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 Professionally Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professionally Managed has no effect on the direction of Merck i.e., Merck and Professionally Managed go up and down completely randomly.
Pair Corralation between Merck and Professionally Managed
Considering the 90-day investment horizon Merck Company is expected to generate 6.21 times more return on investment than Professionally Managed. However, Merck is 6.21 times more volatile than Professionally Managed Portfolios. It trades about -0.01 of its potential returns per unit of risk. Professionally Managed Portfolios is currently generating about -0.27 per unit of risk. If you would invest 10,020 in Merck Company on October 11, 2024 and sell it today you would lose (35.00) from holding Merck Company or give up 0.35% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Merck Company vs. Professionally Managed Portfol
Performance |
Timeline |
Merck Company |
Professionally Managed |
Merck and Professionally Managed Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and Professionally Managed
The main advantage of trading using opposite Merck and Professionally Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Professionally Managed 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 Professionally Managed will offset losses from the drop in Professionally Managed's long position.Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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