Correlation Between Merck and 62954HAL2

Can any of the company-specific risk be diversified away by investing in both Merck and 62954HAL2 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 62954HAL2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and NXPI 3125 15 FEB 42, you can compare the effects of market volatilities on Merck and 62954HAL2 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 62954HAL2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 62954HAL2.

Diversification Opportunities for Merck and 62954HAL2

-0.1

Correlation Coefficient

Merck  62954HAL2

Good diversification

The 3 months correlation between Merck and 62954HAL2 is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and NXPI 3125 15 FEB 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXPI 3125 15 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 62954HAL2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXPI 3125 15 has no effect on the direction of Merck i.e., Merck and 62954HAL2 go up and down completely randomly.

Pair Corralation between Merck and 62954HAL2

Considering the 90-day investment horizon Merck Company is expected to generate 0.44 times more return on investment than 62954HAL2. However, Merck Company is 2.27 times less risky than 62954HAL2. It trades about 0.05 of its potential returns per unit of risk. NXPI 3125 15 FEB 42 is currently generating about -0.02 per unit of risk. If you would invest  9,858  in Merck Company on September 13, 2024 and sell it today you would earn a total of  117.00  from holding Merck Company or generate 1.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

Merck Company  vs.  NXPI 3125 15 FEB 42

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 abnormal 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.

NXPI 3125 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NXPI 3125 15 FEB 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NXPI 3125 15 FEB 42 investors.

Pair Trading with Merck and 62954HAL2

The main advantage of trading using opposite Merck and 62954HAL2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 62954HAL2 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 62954HAL2 will offset losses from the drop in 62954HAL2's long position.

The idea behind Merck Company and NXPI 3125 15 FEB 42 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.