Correlation Between Merck and Amplify ETF

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

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

Diversification Opportunities for Merck and Amplify ETF

-0.54

Correlation Coefficient

Merck  Amplify ETF

Excellent diversification

The 3 months correlation between Merck and Amplify is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Amplify ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify ETF 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 Amplify ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify ETF Trust has no effect on the direction of Merck i.e., Merck and Amplify ETF go up and down completely randomly.

Pair Corralation between Merck and Amplify ETF

Considering the 90-day investment horizon Merck Company is expected to under-perform the Amplify ETF. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.19 times less risky than Amplify ETF. The stock trades about -0.04 of its potential returns per unit of risk. The Amplify ETF Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,510  in Amplify ETF Trust on September 4, 2024 and sell it today you would earn a total of  278.00  from holding Amplify ETF Trust or generate 4.27% return on investment over 90 days.

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

Merck Company  vs.  Amplify ETF Trust

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amplify ETF Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amplify ETF Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Amplify ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Merck and Amplify ETF

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

The idea behind Merck Company and Amplify ETF 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.