Correlation Between Merck and Msvif Growth

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

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

Diversification Opportunities for Merck and Msvif Growth

-0.67

Correlation Coefficient

Merck  Msvif Growth

Excellent diversification

The 3 months correlation between Merck and Msvif is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Msvif Growth Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msvif Growth Port 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 Msvif Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msvif Growth Port has no effect on the direction of Merck i.e., Merck and Msvif Growth go up and down completely randomly.

Pair Corralation between Merck and Msvif Growth

Considering the 90-day investment horizon Merck Company is expected to under-perform the Msvif Growth. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.48 times less risky than Msvif Growth. The stock trades about -0.02 of its potential returns per unit of risk. The Msvif Growth Port is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,545  in Msvif Growth Port on December 20, 2024 and sell it today you would lose (24.00) from holding Msvif Growth Port or give up 1.55% of portfolio value over 90 days.

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

Merck Company  vs.  Msvif Growth Port

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 quite persistent basic indicators, Merck is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Msvif Growth Port

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Merck Company and Msvif Growth Port 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.