Correlation Between Merck and Oklahoma College

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

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

Diversification Opportunities for Merck and Oklahoma College

-0.79

Correlation Coefficient

Merck  Oklahoma College

Pay attention - limited upside

The 3 months correlation between Merck and Oklahoma is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Oklahoma College Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma College Savings 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 Oklahoma College. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma College Savings has no effect on the direction of Merck i.e., Merck and Oklahoma College go up and down completely randomly.

Pair Corralation between Merck and Oklahoma College

Considering the 90-day investment horizon Merck Company is expected to under-perform the Oklahoma College. In addition to that, Merck is 1.09 times more volatile than Oklahoma College Savings. It trades about -0.19 of its total potential returns per unit of risk. Oklahoma College Savings is currently generating about 0.13 per unit of volatility. If you would invest  1,526  in Oklahoma College Savings on September 20, 2024 and sell it today you would earn a total of  134.00  from holding Oklahoma College Savings or generate 8.78% return on investment over 90 days.

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

Merck Company  vs.  Oklahoma College Savings

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.

Oklahoma College Savings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oklahoma College Savings are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Oklahoma College may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Merck and Oklahoma College

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

The idea behind Merck Company and Oklahoma College Savings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.