Correlation Between Merck and Invesco Exchange

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

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

Diversification Opportunities for Merck and Invesco Exchange

-0.72

Correlation Coefficient

Merck  Invesco Exchange

Pay attention - limited upside

The 3 months correlation between Merck and Invesco is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Invesco Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Exchange Traded 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 Invesco Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Exchange Traded has no effect on the direction of Merck i.e., Merck and Invesco Exchange go up and down completely randomly.

Pair Corralation between Merck and Invesco Exchange

Considering the 90-day investment horizon Merck Company is expected to under-perform the Invesco Exchange. In addition to that, Merck is 1.29 times more volatile than Invesco Exchange Traded. It trades about -0.18 of its total potential returns per unit of risk. Invesco Exchange Traded is currently generating about 0.12 per unit of volatility. If you would invest  2,824  in Invesco Exchange Traded on September 14, 2024 and sell it today you would earn a total of  200.00  from holding Invesco Exchange Traded or generate 7.08% return on investment over 90 days.

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

Merck Company  vs.  Invesco Exchange Traded

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Invesco Exchange Traded

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Exchange Traded are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Invesco Exchange may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Merck and Invesco Exchange

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

The idea behind Merck Company and Invesco Exchange Traded 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 Transaction History module to view history of all your transactions and understand their impact on performance.