Correlation Between Merck and Transamerica Funds

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

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

Diversification Opportunities for Merck and Transamerica Funds

0.0

Correlation Coefficient

Merck  Transamerica Funds

Pay attention - limited upside

The 3 months correlation between Merck and Transamerica is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Transamerica Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Funds 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 Transamerica Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Funds has no effect on the direction of Merck i.e., Merck and Transamerica Funds go up and down completely randomly.

Pair Corralation between Merck and Transamerica Funds

If you would invest  100.00  in Transamerica Funds on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Transamerica Funds or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Merck Company  vs.  Transamerica Funds

Merck Company

Risk-Adjusted Performance

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.

Transamerica Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Transamerica Funds 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 Transamerica Funds

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

The idea behind Merck Company and Transamerica Funds 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.