Correlation Between Merck and Msvif Mid

Can any of the company-specific risk be diversified away by investing in both Merck and Msvif Mid 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 Mid 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 Mid Cap, you can compare the effects of market volatilities on Merck and Msvif Mid 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 Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Msvif Mid.

Diversification Opportunities for Merck and Msvif Mid

-0.3

Correlation Coefficient

Merck  Msvif Mid

Very good diversification

The 3 months correlation between Merck and Msvif is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Msvif Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msvif Mid 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 Msvif Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msvif Mid Cap has no effect on the direction of Merck i.e., Merck and Msvif Mid go up and down completely randomly.

Pair Corralation between Merck and Msvif Mid

Considering the 90-day investment horizon Merck Company is expected to generate 0.87 times more return on investment than Msvif Mid. However, Merck Company is 1.15 times less risky than Msvif Mid. It trades about -0.02 of its potential returns per unit of risk. Msvif Mid Cap is currently generating about -0.07 per unit of risk. If you would invest  9,721  in Merck Company on December 20, 2024 and sell it today you would lose (319.00) from holding Merck Company or give up 3.28% 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.  Msvif Mid 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 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 Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Msvif Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Merck and Msvif Mid

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

The idea behind Merck Company and Msvif Mid 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 Global Correlations module to find global opportunities by holding instruments from different markets.