Correlation Between Merck and Plan Investment

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

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

Diversification Opportunities for Merck and Plan Investment

0.0

Correlation Coefficient

Merck  Plan Investment

Pay attention - limited upside

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

Pair Corralation between Merck and Plan Investment

If you would invest  100.00  in Plan Investment on December 18, 2024 and sell it today you would earn a total of  0.00  from holding Plan Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Merck Company  vs.  Plan Investment

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Plan Investment

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Merck Company and Plan Investment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.