Correlation Between Merrill Lynch and Invesco DB
Can any of the company-specific risk be diversified away by investing in both Merrill Lynch and Invesco DB 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 Merrill Lynch and Invesco DB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merrill Lynch and Invesco DB Agriculture, you can compare the effects of market volatilities on Merrill Lynch and Invesco DB 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 Merrill Lynch with a short position of Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merrill Lynch and Invesco DB.
Diversification Opportunities for Merrill Lynch and Invesco DB
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merrill and Invesco is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Merrill Lynch and Invesco DB Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Agriculture and Merrill Lynch 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 Merrill Lynch are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Agriculture has no effect on the direction of Merrill Lynch i.e., Merrill Lynch and Invesco DB go up and down completely randomly.
Pair Corralation between Merrill Lynch and Invesco DB
Considering the 90-day investment horizon Merrill Lynch is expected to under-perform the Invesco DB. In addition to that, Merrill Lynch is 16.49 times more volatile than Invesco DB Agriculture. It trades about -0.13 of its total potential returns per unit of risk. Invesco DB Agriculture is currently generating about 0.12 per unit of volatility. If you would invest 1,908 in Invesco DB Agriculture on January 24, 2024 and sell it today you would earn a total of 711.00 from holding Invesco DB Agriculture or generate 37.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 16.05% |
| Values | Daily Returns |
Merrill Lynch vs. Invesco DB Agriculture
Performance |
| Timeline |
| Merrill Lynch |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Invesco DB Agriculture |
Merrill Lynch and Invesco DB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merrill Lynch and Invesco DB
The main advantage of trading using opposite Merrill Lynch and Invesco DB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merrill Lynch position performs unexpectedly, Invesco DB 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 Invesco DB will offset losses from the drop in Invesco DB's long position.| Merrill Lynch vs. Vanguard Total Stock | Merrill Lynch vs. SPDR SP 500 | Merrill Lynch vs. iShares Core SP | Merrill Lynch vs. Vanguard Total Bond |
| Invesco DB vs. Invesco DB Commodity | Invesco DB vs. VanEck Agribusiness ETF | Invesco DB vs. Invesco DB Base | Invesco DB vs. Teucrium Corn |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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