Correlation Between Merck and Intact Financial
Can any of the company-specific risk be diversified away by investing in both Merck and Intact Financial 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 Intact Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Intact Financial, you can compare the effects of market volatilities on Merck and Intact Financial 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 Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Intact Financial.
Diversification Opportunities for Merck and Intact Financial
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Intact is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of Merck i.e., Merck and Intact Financial go up and down completely randomly.
Pair Corralation between Merck and Intact Financial
Considering the 90-day investment horizon Merck Company is expected to under-perform the Intact Financial. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.18 times less risky than Intact Financial. The stock trades about 0.0 of its potential returns per unit of risk. The Intact Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,500 in Intact Financial on September 14, 2024 and sell it today you would earn a total of 4,100 from holding Intact Financial or generate 28.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 87.68% |
Values | Daily Returns |
Merck Company vs. Intact Financial
Performance |
Timeline |
Merck Company |
Intact Financial |
Merck and Intact Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and Intact Financial
The main advantage of trading using opposite Merck and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Intact Financial 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 Intact Financial will offset losses from the drop in Intact Financial's long position.Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
Intact Financial vs. Freedom Bank of | Intact Financial vs. HUMANA INC | Intact Financial vs. Barloworld Ltd ADR | Intact Financial vs. Morningstar Unconstrained Allocation |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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