Correlation Between Merck and ProShares UltraPro

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

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

Diversification Opportunities for Merck and ProShares UltraPro

-0.9

Correlation Coefficient

Merck  ProShares UltraPro

Pay attention - limited upside

The 3 months correlation between Merck and ProShares is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short 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 ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Short has no effect on the direction of Merck i.e., Merck and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Merck and ProShares UltraPro

Considering the 90-day investment horizon Merck Company is expected to generate 0.54 times more return on investment than ProShares UltraPro. However, Merck Company is 1.84 times less risky than ProShares UltraPro. It trades about 0.16 of its potential returns per unit of risk. ProShares UltraPro Short is currently generating about -0.03 per unit of risk. If you would invest  9,579  in Merck Company on September 19, 2024 and sell it today you would earn a total of  427.00  from holding Merck Company or generate 4.46% return on investment over 90 days.

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

Merck Company  vs.  ProShares UltraPro Short

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.

ProShares UltraPro Short

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Short are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ProShares UltraPro unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and ProShares UltraPro

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

The idea behind Merck Company and ProShares UltraPro Short 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.