Correlation Between Merck and Toroso Investments

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

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

Diversification Opportunities for Merck and Toroso Investments

-0.91

Correlation Coefficient

Merck  Toroso Investments

Pay attention - limited upside

The 3 months correlation between Merck and Toroso is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Toroso Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toroso Investments 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 Toroso Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toroso Investments has no effect on the direction of Merck i.e., Merck and Toroso Investments go up and down completely randomly.

Pair Corralation between Merck and Toroso Investments

If you would invest  9,656  in Merck Company on September 17, 2024 and sell it today you would earn a total of  544.00  from holding Merck Company or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

Merck Company  vs.  Toroso Investments

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.

Toroso Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toroso Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Toroso Investments is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Merck and Toroso Investments

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

The idea behind Merck Company and Toroso Investments 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.