Correlation Between Merck and XPAC Acquisition

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

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

Diversification Opportunities for Merck and XPAC Acquisition

0.68

Correlation Coefficient

Merck  XPAC Acquisition

Poor diversification

The 3 months correlation between Merck and XPAC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and XPAC Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XPAC Acquisition Corp 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 XPAC Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XPAC Acquisition Corp has no effect on the direction of Merck i.e., Merck and XPAC Acquisition go up and down completely randomly.

Pair Corralation between Merck and XPAC Acquisition

If you would invest  6.21  in XPAC Acquisition Corp on October 12, 2024 and sell it today you would earn a total of  0.00  from holding XPAC Acquisition Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.53%
Values	Daily Returns

Merck Company  vs.  XPAC Acquisition Corp

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 uncertain 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.

XPAC Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XPAC Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, XPAC Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Merck and XPAC Acquisition

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

The idea behind Merck Company and XPAC Acquisition Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.