Correlation Between Merck and Proof Acquisition

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

Diversification Opportunities for Merck and Proof Acquisition

0.0

Correlation Coefficient

Merck  Proof Acquisition

Pay attention - limited upside

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

Pair Corralation between Merck and Proof Acquisition

If you would invest  1,057  in Proof Acquisition I on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Proof Acquisition I or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Merck Company  vs.  Proof Acquisition I

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 latest unsteady 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.

Proof Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proof Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Proof Acquisition is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Merck and Proof Acquisition

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

The idea behind Merck Company and Proof Acquisition I 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.