Correlation Between Merck and Ivy Advantus

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

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

Diversification Opportunities for Merck and Ivy Advantus

-0.69

Correlation Coefficient

Merck  Ivy Advantus

Excellent diversification

The 3 months correlation between Merck and Ivy is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ivy Advantus Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Advantus Bond 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 Ivy Advantus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Advantus Bond has no effect on the direction of Merck i.e., Merck and Ivy Advantus go up and down completely randomly.

Pair Corralation between Merck and Ivy Advantus

Considering the 90-day investment horizon Merck Company is expected to under-perform the Ivy Advantus. In addition to that, Merck is 2.85 times more volatile than Ivy Advantus Bond. It trades about 0.0 of its total potential returns per unit of risk. Ivy Advantus Bond is currently generating about 0.03 per unit of volatility. If you would invest  881.00  in Ivy Advantus Bond on October 11, 2024 and sell it today you would earn a total of  36.00  from holding Ivy Advantus Bond or generate 4.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	78.99%
Values	Daily Returns

Merck Company  vs.  Ivy Advantus Bond

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 uncertain 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.

Ivy Advantus Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivy Advantus Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Ivy Advantus 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 Ivy Advantus

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

The idea behind Merck Company and Ivy Advantus Bond 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.