Correlation Between Merck and Delaware High

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

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

Diversification Opportunities for Merck and Delaware High

-0.31

Correlation Coefficient

Merck  Delaware High

Very good diversification

The 3 months correlation between Merck and Delaware is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Delaware High Yield Opportunit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware High Yield 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 Delaware High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware High Yield has no effect on the direction of Merck i.e., Merck and Delaware High go up and down completely randomly.

Pair Corralation between Merck and Delaware High

Considering the 90-day investment horizon Merck is expected to generate 2.06 times less return on investment than Delaware High. In addition to that, Merck is 5.61 times more volatile than Delaware High Yield Opportunities. It trades about 0.01 of its total potential returns per unit of risk. Delaware High Yield Opportunities is currently generating about 0.08 per unit of volatility. If you would invest  329.00  in Delaware High Yield Opportunities on September 4, 2024 and sell it today you would earn a total of  10.00  from holding Delaware High Yield Opportunities or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.75%
Values	Daily Returns

Merck Company  vs.  Delaware High Yield Opportunit

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 weak 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.

Delaware High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delaware High Yield Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Delaware High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merck and Delaware High

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

The idea behind Merck Company and Delaware High Yield Opportunities 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.