Correlation Between Merck and Nasdaq-100(r)

Can any of the company-specific risk be diversified away by investing in both Merck and Nasdaq-100(r) 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 Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Merck and Nasdaq-100(r) 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 Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Nasdaq-100(r).

Diversification Opportunities for Merck and Nasdaq-100(r)

-0.51

Correlation Coefficient

Merck  Nasdaq-100(r)

Excellent diversification

The 3 months correlation between Merck and Nasdaq-100(r) is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x 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 Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Merck i.e., Merck and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Merck and Nasdaq-100(r)

Considering the 90-day investment horizon Merck Company is expected to generate 0.39 times more return on investment than Nasdaq-100(r). However, Merck Company is 2.58 times less risky than Nasdaq-100(r). It trades about -0.05 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about -0.14 per unit of risk. If you would invest  10,104  in Merck Company on October 4, 2024 and sell it today you would lose (156.00) from holding Merck Company or give up 1.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Merck Company  vs.  Nasdaq 100 2x Strategy

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 weak 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.

Nasdaq 100 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Nasdaq-100(r) 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 Nasdaq-100(r)

The main advantage of trading using opposite Merck and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.

The idea behind Merck Company and Nasdaq 100 2x Strategy 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.