Correlation Between Merck and 694308KJ5

Can any of the company-specific risk be diversified away by investing in both Merck and 694308KJ5 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 694308KJ5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and PCG 615 15 JAN 33, you can compare the effects of market volatilities on Merck and 694308KJ5 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 694308KJ5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 694308KJ5.

Diversification Opportunities for Merck and 694308KJ5

0.2

Correlation Coefficient

Merck  694308KJ5

Modest diversification

The 3 months correlation between Merck and 694308KJ5 is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and PCG 615 15 JAN 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCG 615 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 694308KJ5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCG 615 15 has no effect on the direction of Merck i.e., Merck and 694308KJ5 go up and down completely randomly.

Pair Corralation between Merck and 694308KJ5

Considering the 90-day investment horizon Merck Company is expected to under-perform the 694308KJ5. In addition to that, Merck is 1.66 times more volatile than PCG 615 15 JAN 33. It trades about -0.06 of its total potential returns per unit of risk. PCG 615 15 JAN 33 is currently generating about 0.01 per unit of volatility. If you would invest  10,402  in PCG 615 15 JAN 33 on December 25, 2024 and sell it today you would earn a total of  47.00  from holding PCG 615 15 JAN 33 or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Merck Company  vs.  PCG 615 15 JAN 33

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.

PCG 615 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days PCG 615 15 JAN 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 694308KJ5 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merck and 694308KJ5

The main advantage of trading using opposite Merck and 694308KJ5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 694308KJ5 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 694308KJ5 will offset losses from the drop in 694308KJ5's long position.

The idea behind Merck Company and PCG 615 15 JAN 33 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.