Correlation Between Merck and Green Plains

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

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

Diversification Opportunities for Merck and Green Plains

-0.6

Correlation Coefficient

Merck  Green Plains

Excellent diversification

The 3 months correlation between Merck and Green is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Green Plains Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Plains Partners 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 Green Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Plains Partners has no effect on the direction of Merck i.e., Merck and Green Plains go up and down completely randomly.

Pair Corralation between Merck and Green Plains

If you would invest  1,416  in Green Plains Partners on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Green Plains Partners or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Merck Company  vs.  Green Plains Partners

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 unsteady 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.

Green Plains Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Plains Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Green Plains is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Merck and Green Plains

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

The idea behind Merck Company and Green Plains Partners 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.