Correlation Between Merck and 674599DU6

Can any of the company-specific risk be diversified away by investing in both Merck and 674599DU6 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 674599DU6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and OXY 795 15 APR 29, you can compare the effects of market volatilities on Merck and 674599DU6 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 674599DU6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 674599DU6.

Diversification Opportunities for Merck and 674599DU6

-0.53

Correlation Coefficient

Merck  674599DU6

Excellent diversification

The 3 months correlation between Merck and 674599DU6 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and OXY 795 15 APR 29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OXY 795 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 674599DU6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OXY 795 15 has no effect on the direction of Merck i.e., Merck and 674599DU6 go up and down completely randomly.

Pair Corralation between Merck and 674599DU6

Considering the 90-day investment horizon Merck Company is expected to under-perform the 674599DU6. In addition to that, Merck is 1.05 times more volatile than OXY 795 15 APR 29. It trades about -0.2 of its total potential returns per unit of risk. OXY 795 15 APR 29 is currently generating about -0.14 per unit of volatility. If you would invest  11,260  in OXY 795 15 APR 29 on September 14, 2024 and sell it today you would lose (325.00) from holding OXY 795 15 APR 29 or give up 2.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.57%
Values	Daily Returns

Merck Company  vs.  OXY 795 15 APR 29

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.

OXY 795 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OXY 795 15 APR 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 OXY 795 15 APR 29 investors.

Pair Trading with Merck and 674599DU6

The main advantage of trading using opposite Merck and 674599DU6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 674599DU6 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 674599DU6 will offset losses from the drop in 674599DU6's long position.

The idea behind Merck Company and OXY 795 15 APR 29 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.