Correlation Between Merck and Rain Enhancement

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

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

Diversification Opportunities for Merck and Rain Enhancement

0.76

Correlation Coefficient

Merck  Rain Enhancement

Poor diversification

The 3 months correlation between Merck and Rain is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Rain Enhancement Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rain Enhancement Tec 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 Rain Enhancement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rain Enhancement Tec has no effect on the direction of Merck i.e., Merck and Rain Enhancement go up and down completely randomly.

Pair Corralation between Merck and Rain Enhancement

If you would invest  141.00  in Rain Enhancement Technologies on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Rain Enhancement Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

Merck Company  vs.  Rain Enhancement Technologies

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 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.

Rain Enhancement Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rain Enhancement Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Rain Enhancement is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Merck and Rain Enhancement

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

The idea behind Merck Company and Rain Enhancement Technologies 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.