Correlation Between Merck and Elevation Series

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

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

Diversification Opportunities for Merck and Elevation Series

-0.38

Correlation Coefficient

Merck  Elevation Series

Very good diversification

The 3 months correlation between Merck and Elevation is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Elevation Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elevation Series Trust 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 Elevation Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elevation Series Trust has no effect on the direction of Merck i.e., Merck and Elevation Series go up and down completely randomly.

Pair Corralation between Merck and Elevation Series

Considering the 90-day investment horizon Merck Company is expected to under-perform the Elevation Series. In addition to that, Merck is 1.27 times more volatile than Elevation Series Trust. It trades about -0.02 of its total potential returns per unit of risk. Elevation Series Trust is currently generating about 0.03 per unit of volatility. If you would invest  2,593  in Elevation Series Trust on December 18, 2024 and sell it today you would earn a total of  51.00  from holding Elevation Series Trust or generate 1.97% return on investment over 90 days.

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

Merck Company  vs.  Elevation Series Trust

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 quite persistent basic indicators, Merck is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Elevation Series Trust

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elevation Series Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Elevation Series is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merck and Elevation Series

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

The idea behind Merck Company and Elevation Series Trust 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.