Correlation Between Merck and Jaws Hurricane

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

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

Diversification Opportunities for Merck and Jaws Hurricane

-0.89

Correlation Coefficient

Merck  Jaws Hurricane

Pay attention - limited upside

The 3 months correlation between Merck and Jaws is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Jaws Hurricane Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jaws Hurricane Acqui 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 Jaws Hurricane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jaws Hurricane Acqui has no effect on the direction of Merck i.e., Merck and Jaws Hurricane go up and down completely randomly.

Pair Corralation between Merck and Jaws Hurricane

Considering the 90-day investment horizon Merck Company is expected to under-perform the Jaws Hurricane. In addition to that, Merck is 12.44 times more volatile than Jaws Hurricane Acquisition. It trades about 0.0 of its total potential returns per unit of risk. Jaws Hurricane Acquisition is currently generating about 0.23 per unit of volatility. If you would invest  996.00  in Jaws Hurricane Acquisition on September 18, 2024 and sell it today you would earn a total of  28.00  from holding Jaws Hurricane Acquisition or generate 2.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	23.99%
Values	Daily Returns

Merck Company  vs.  Jaws Hurricane Acquisition

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 uncertain 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.

Jaws Hurricane Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jaws Hurricane Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Jaws Hurricane is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Merck and Jaws Hurricane

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

The idea behind Merck Company and Jaws Hurricane Acquisition 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.