Correlation Between Merck and Columbia Disciplined

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

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

Diversification Opportunities for Merck and Columbia Disciplined

-0.77

Correlation Coefficient

Merck  Columbia Disciplined

Pay attention - limited upside

The 3 months correlation between Merck and Columbia is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Columbia Disciplined E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Disciplined 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 Columbia Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Disciplined has no effect on the direction of Merck i.e., Merck and Columbia Disciplined go up and down completely randomly.

Pair Corralation between Merck and Columbia Disciplined

If you would invest  1,701  in Columbia Disciplined E on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Columbia Disciplined E or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Merck Company  vs.  Columbia Disciplined E

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 abnormal 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.

Columbia Disciplined

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Columbia Disciplined E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Disciplined may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Merck and Columbia Disciplined

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

The idea behind Merck Company and Columbia Disciplined E 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.