Correlation Between Merck and NESNVX

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

By analyzing existing cross correlation between Merck Company and NESNVX 39 24 SEP 38, you can compare the effects of market volatilities on Merck and NESNVX 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 NESNVX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and NESNVX.

Diversification Opportunities for Merck and NESNVX

0.71

Correlation Coefficient

Merck  NESNVX

Poor diversification

The 3 months correlation between Merck and NESNVX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and NESNVX 39 24 SEP 38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NESNVX 24 SEP 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 NESNVX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NESNVX 24 SEP has no effect on the direction of Merck i.e., Merck and NESNVX go up and down completely randomly.

Pair Corralation between Merck and NESNVX

Considering the 90-day investment horizon Merck Company is expected to generate 0.44 times more return on investment than NESNVX. However, Merck Company is 2.25 times less risky than NESNVX. It trades about -0.15 of its potential returns per unit of risk. NESNVX 39 24 SEP 38 is currently generating about -0.1 per unit of risk. If you would invest  11,266  in Merck Company on September 30, 2024 and sell it today you would lose (1,296) from holding Merck Company or give up 11.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.44%
Values	Daily Returns

Merck Company  vs.  NESNVX 39 24 SEP 38

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 unsteady 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.

NESNVX 24 SEP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NESNVX 39 24 SEP 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for NESNVX 39 24 SEP 38 investors.

Pair Trading with Merck and NESNVX

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

The idea behind Merck Company and NESNVX 39 24 SEP 38 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.