Correlation Between Merck and Worldwide Webb

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

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

Diversification Opportunities for Merck and Worldwide Webb

-0.63

Correlation Coefficient

Merck  Worldwide Webb

Excellent diversification

The 3 months correlation between Merck and Worldwide is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Worldwide Webb Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worldwide Webb Acqui 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 Worldwide Webb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worldwide Webb Acqui has no effect on the direction of Merck i.e., Merck and Worldwide Webb go up and down completely randomly.

Pair Corralation between Merck and Worldwide Webb

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	Weak
Accuracy	5.0%
Values	Daily Returns

Merck Company  vs.  Worldwide Webb Acquisition

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.

Worldwide Webb Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Merck and Worldwide Webb

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

The idea behind Merck Company and Worldwide Webb Acquisition 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.