Correlation Between Merck and Ballast SmallMid

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

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

Diversification Opportunities for Merck and Ballast SmallMid

0.06

Correlation Coefficient

Merck  Ballast SmallMid

Significant diversification

The 3 months correlation between Merck and Ballast is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ballast SmallMid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballast SmallMid Cap 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 Ballast SmallMid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballast SmallMid Cap has no effect on the direction of Merck i.e., Merck and Ballast SmallMid go up and down completely randomly.

Pair Corralation between Merck and Ballast SmallMid

Considering the 90-day investment horizon Merck Company is expected to under-perform the Ballast SmallMid. In addition to that, Merck is 1.65 times more volatile than Ballast SmallMid Cap. It trades about -0.08 of its total potential returns per unit of risk. Ballast SmallMid Cap is currently generating about -0.08 per unit of volatility. If you would invest  4,132  in Ballast SmallMid Cap on December 28, 2024 and sell it today you would lose (221.00) from holding Ballast SmallMid Cap or give up 5.35% of portfolio value over 90 days.

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

Merck Company  vs.  Ballast SmallMid Cap

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.

Ballast SmallMid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ballast SmallMid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Ballast SmallMid is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merck and Ballast SmallMid

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

The idea behind Merck Company and Ballast SmallMid Cap 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.