Correlation Between LOWES and Merck

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

By analyzing existing cross correlation between LOWES INC 3375 and Merck Company, you can compare the effects of market volatilities on LOWES and Merck 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 LOWES with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOWES and Merck.

Diversification Opportunities for LOWES and Merck

0.0

Correlation Coefficient

LOWES  Merck

Pay attention - limited upside

The 3 months correlation between LOWES and Merck is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LOWES INC 3375 and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and LOWES 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 LOWES INC 3375 are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of LOWES i.e., LOWES and Merck go up and down completely randomly.

Pair Corralation between LOWES and Merck

If you would invest  0.00  in LOWES INC 3375 on December 2, 2024 and sell it today you would earn a total of  0.00  from holding LOWES INC 3375 or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	2.5%
Values	Daily Returns

LOWES INC 3375  vs.  Merck Company

LOWES INC 3375

Risk-Adjusted Performance

Weak

Over the last 90 days LOWES INC 3375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOWES is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with LOWES and Merck

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

The idea behind LOWES INC 3375 and Merck Company 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.