Correlation Between Merck and Timothy Plan

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

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

Diversification Opportunities for Merck and Timothy Plan

-0.65

Correlation Coefficient

Merck  Timothy Plan

Excellent diversification

The 3 months correlation between Merck and Timothy is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Timothy Plan LargeMid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan LargeMid 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 Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan LargeMid has no effect on the direction of Merck i.e., Merck and Timothy Plan go up and down completely randomly.

Pair Corralation between Merck and Timothy Plan

Considering the 90-day investment horizon Merck Company is expected to under-perform the Timothy Plan. In addition to that, Merck is 1.75 times more volatile than Timothy Plan LargeMid. It trades about -0.19 of its total potential returns per unit of risk. Timothy Plan LargeMid is currently generating about 0.09 per unit of volatility. If you would invest  4,303  in Timothy Plan LargeMid on September 17, 2024 and sell it today you would earn a total of  161.00  from holding Timothy Plan LargeMid or generate 3.74% 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.  Timothy Plan LargeMid

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.

Timothy Plan LargeMid

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Timothy Plan LargeMid are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Timothy Plan is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Merck and Timothy Plan

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

The idea behind Merck Company and Timothy Plan LargeMid 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.