Correlation Between Merck and Stone Ridge

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

By analyzing existing cross correlation between Merck Company and Stone Ridge 2057, you can compare the effects of market volatilities on Merck and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Stone Ridge.

Diversification Opportunities for Merck and Stone Ridge

0.0

Correlation Coefficient

Merck  Stone Ridge

Pay attention - limited upside

The 3 months correlation between Merck and Stone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Stone Ridge 2057 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2057 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2057 has no effect on the direction of Merck i.e., Merck and Stone Ridge go up and down completely randomly.

Pair Corralation between Merck and Stone Ridge

If you would invest  0.00  in Stone Ridge 2057 on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Stone Ridge 2057 or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.67%
Values	Daily Returns

Merck Company  vs.  Stone Ridge 2057

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.

Stone Ridge 2057

Risk-Adjusted Performance

Insignificant

Over the last 90 days Stone Ridge 2057 has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Stone Ridge 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 Stone Ridge

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

The idea behind Merck Company and Stone Ridge 2057 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.