Correlation Between Merck and Edify Acquisition

Can any of the company-specific risk be diversified away by investing in both Merck and Edify 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 Edify 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 Edify Acquisition Corp, you can compare the effects of market volatilities on Merck and Edify 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 Edify Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Edify Acquisition.

Diversification Opportunities for Merck and Edify Acquisition

-0.81

Correlation Coefficient

Merck  Edify Acquisition

Pay attention - limited upside

The 3 months correlation between Merck and Edify is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Edify Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edify 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 Edify Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edify Acquisition Corp has no effect on the direction of Merck i.e., Merck and Edify Acquisition go up and down completely randomly.

Pair Corralation between Merck and Edify Acquisition

Considering the 90-day investment horizon Merck Company is expected to under-perform the Edify Acquisition. In addition to that, Merck is 4.65 times more volatile than Edify Acquisition Corp. It trades about 0.0 of its total potential returns per unit of risk. Edify Acquisition Corp is currently generating about 0.16 per unit of volatility. If you would invest  1,007  in Edify Acquisition Corp on September 20, 2024 and sell it today you would earn a total of  63.00  from holding Edify Acquisition Corp or generate 6.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	28.23%
Values	Daily Returns

Merck Company  vs.  Edify 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 uncertain 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.

Edify Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edify Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Edify Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merck and Edify Acquisition

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

The idea behind Merck Company and Edify 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.