Correlation Between Merck and Navistar International
Can any of the company-specific risk be diversified away by investing in both Merck and Navistar International 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 Navistar International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Navistar International, you can compare the effects of market volatilities on Merck and Navistar International 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 Navistar International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Navistar International.
Diversification Opportunities for Merck and Navistar International
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Navistar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Navistar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navistar International 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 Navistar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navistar International has no effect on the direction of Merck i.e., Merck and Navistar International go up and down completely randomly.
Pair Corralation between Merck and Navistar International
If you would invest 8,352 in Merck Company on January 26, 2024 and sell it today you would earn a total of 4,348 from holding Merck Company or generate 52.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Merck Company vs. Navistar International
Performance |
| Timeline |
| Merck Company |
| Navistar International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Navistar International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Navistar International
The main advantage of trading using opposite Merck and Navistar International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Navistar International 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 Navistar International will offset losses from the drop in Navistar International's long position.The idea behind Merck Company and Navistar International 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.| Navistar International vs. American Video Teleconferencing | Navistar International vs. BCB Bancorp | Navistar International vs. Playa Hotels Resorts | Navistar International vs. Funko Inc |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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