Correlation Between Sharps Technology and Merrill Lynch

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

By analyzing existing cross correlation between Sharps Technology Warrant and Merrill Lynch Depositor, you can compare the effects of market volatilities on Sharps Technology and Merrill Lynch 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 Sharps Technology with a short position of Merrill Lynch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sharps Technology and Merrill Lynch.

Diversification Opportunities for Sharps Technology and Merrill Lynch

0.76

Correlation Coefficient

Sharps Technology  Merrill Lynch

Poor diversification

The 3 months correlation between Sharps and Merrill is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sharps Technology Warrant and Merrill Lynch Depositor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch Depositor and Sharps Technology 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 Sharps Technology Warrant are associated (or correlated) with Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch Depositor has no effect on the direction of Sharps Technology i.e., Sharps Technology and Merrill Lynch go up and down completely randomly.

Pair Corralation between Sharps Technology and Merrill Lynch

Assuming the 90 days horizon Sharps Technology Warrant is expected to under-perform the Merrill Lynch. In addition to that, Sharps Technology is 22.9 times more volatile than Merrill Lynch Depositor. It trades about -0.03 of its total potential returns per unit of risk. Merrill Lynch Depositor is currently generating about 0.03 per unit of volatility. If you would invest  2,620  in Merrill Lynch Depositor on September 19, 2024 and sell it today you would earn a total of  10.00  from holding Merrill Lynch Depositor or generate 0.38% return on investment over 90 days.

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

Sharps Technology Warrant  vs.  Merrill Lynch Depositor

Sharps Technology Warrant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sharps Technology Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrill Lynch Depositor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Merrill Lynch is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sharps Technology and Merrill Lynch

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

The idea behind Sharps Technology Warrant and Merrill Lynch Depositor 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.