Correlation Between Merck and Brinker Capital

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

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

Diversification Opportunities for Merck and Brinker Capital

-0.61

Correlation Coefficient

Merck  Brinker Capital

Excellent diversification

The 3 months correlation between Merck and Brinker is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Brinker Capital Destinations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker Capital Dest 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 Brinker Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker Capital Dest has no effect on the direction of Merck i.e., Merck and Brinker Capital go up and down completely randomly.

Pair Corralation between Merck and Brinker Capital

Considering the 90-day investment horizon Merck Company is expected to under-perform the Brinker Capital. In addition to that, Merck is 2.23 times more volatile than Brinker Capital Destinations. It trades about -0.01 of its total potential returns per unit of risk. Brinker Capital Destinations is currently generating about 0.12 per unit of volatility. If you would invest  856.00  in Brinker Capital Destinations on October 4, 2024 and sell it today you would earn a total of  315.00  from holding Brinker Capital Destinations or generate 36.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Merck Company  vs.  Brinker Capital Destinations

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 weak 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.

Brinker Capital Dest

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker Capital Destinations are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Brinker Capital 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 Brinker Capital

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

The idea behind Merck Company and Brinker Capital Destinations 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.