Correlation Between Merck and Victory Integrity

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

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

Diversification Opportunities for Merck and Victory Integrity

0.38

Correlation Coefficient

Merck  Victory Integrity

Weak diversification

The 3 months correlation between Merck and Victory is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Victory Integrity Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Integrity 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 Victory Integrity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Integrity has no effect on the direction of Merck i.e., Merck and Victory Integrity go up and down completely randomly.

Pair Corralation between Merck and Victory Integrity

Considering the 90-day investment horizon Merck Company is expected to under-perform the Victory Integrity. In addition to that, Merck is 1.22 times more volatile than Victory Integrity Smallmid Cap. It trades about -0.07 of its total potential returns per unit of risk. Victory Integrity Smallmid Cap is currently generating about -0.01 per unit of volatility. If you would invest  2,234  in Victory Integrity Smallmid Cap on December 2, 2024 and sell it today you would lose (106.00) from holding Victory Integrity Smallmid Cap or give up 4.74% of portfolio value over 90 days.

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

Merck Company  vs.  Victory Integrity 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 abnormal 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.

Victory Integrity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Integrity Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Merck and Victory Integrity

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

The idea behind Merck Company and Victory Integrity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.