Correlation Between Merck and Nuveen Core

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

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

Diversification Opportunities for Merck and Nuveen Core

-0.2

Correlation Coefficient

Merck  Nuveen Core

Good diversification

The 3 months correlation between Merck and Nuveen is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Nuveen Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Core Equity 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 Nuveen Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Core Equity has no effect on the direction of Merck i.e., Merck and Nuveen Core go up and down completely randomly.

Pair Corralation between Merck and Nuveen Core

Considering the 90-day investment horizon Merck Company is expected to under-perform the Nuveen Core. In addition to that, Merck is 1.99 times more volatile than Nuveen Core Equity. It trades about -0.1 of its total potential returns per unit of risk. Nuveen Core Equity is currently generating about -0.07 per unit of volatility. If you would invest  1,534  in Nuveen Core Equity on December 27, 2024 and sell it today you would lose (65.00) from holding Nuveen Core Equity or give up 4.24% of portfolio value over 90 days.

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

Merck Company  vs.  Nuveen Core Equity

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 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.

Nuveen Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Core Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound fundamental indicators, Nuveen Core 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 Nuveen Core

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

The idea behind Merck Company and Nuveen Core Equity 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.