Correlation Between Merck and Buckeye

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

By analyzing existing cross correlation between Merck Company and Buckeye Partners 675, you can compare the effects of market volatilities on Merck and Buckeye 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 Buckeye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Buckeye.

Diversification Opportunities for Merck and Buckeye

-0.49

Correlation Coefficient

Merck  Buckeye

Very good diversification

The 3 months correlation between Merck and Buckeye is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Buckeye Partners 675 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buckeye Partners 675 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 Buckeye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buckeye Partners 675 has no effect on the direction of Merck i.e., Merck and Buckeye go up and down completely randomly.

Pair Corralation between Merck and Buckeye

Considering the 90-day investment horizon Merck Company is expected to generate 0.73 times more return on investment than Buckeye. However, Merck Company is 1.38 times less risky than Buckeye. It trades about -0.07 of its potential returns per unit of risk. Buckeye Partners 675 is currently generating about -0.2 per unit of risk. If you would invest  9,753  in Merck Company on December 30, 2024 and sell it today you would lose (830.00) from holding Merck Company or give up 8.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	37.1%
Values	Daily Returns

Merck Company  vs.  Buckeye Partners 675

Merck Company

Risk-Adjusted Performance

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.

Buckeye Partners 675

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buckeye Partners 675 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for Buckeye Partners 675 investors.

Pair Trading with Merck and Buckeye

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

The idea behind Merck Company and Buckeye Partners 675 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.