Correlation Between Merck and 632525AW1

Can any of the company-specific risk be diversified away by investing in both Merck and 632525AW1 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 632525AW1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and NAB 2648 14 JAN 41, you can compare the effects of market volatilities on Merck and 632525AW1 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 632525AW1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 632525AW1.

Diversification Opportunities for Merck and 632525AW1

-0.53

Correlation Coefficient

Merck  632525AW1

Excellent diversification

The 3 months correlation between Merck and 632525AW1 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and NAB 2648 14 JAN 41 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAB 2648 14 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 632525AW1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAB 2648 14 has no effect on the direction of Merck i.e., Merck and 632525AW1 go up and down completely randomly.

Pair Corralation between Merck and 632525AW1

Considering the 90-day investment horizon Merck Company is expected to under-perform the 632525AW1. In addition to that, Merck is 1.28 times more volatile than NAB 2648 14 JAN 41. It trades about -0.19 of its total potential returns per unit of risk. NAB 2648 14 JAN 41 is currently generating about -0.12 per unit of volatility. If you would invest  7,143  in NAB 2648 14 JAN 41 on September 22, 2024 and sell it today you would lose (222.00) from holding NAB 2648 14 JAN 41 or give up 3.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	42.19%
Values	Daily Returns

Merck Company  vs.  NAB 2648 14 JAN 41

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.

NAB 2648 14

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAB 2648 14 JAN 41 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NAB 2648 14 JAN 41 investors.

Pair Trading with Merck and 632525AW1

The main advantage of trading using opposite Merck and 632525AW1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 632525AW1 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 632525AW1 will offset losses from the drop in 632525AW1's long position.

The idea behind Merck Company and NAB 2648 14 JAN 41 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..