Correlation Between Merck and ProShares UltraShort

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Can any of the company-specific risk be diversified away by investing in both Merck and ProShares UltraShort 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 ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ProShares UltraShort SP500, you can compare the effects of market volatilities on Merck and ProShares UltraShort 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 ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ProShares UltraShort.

Diversification Opportunities for Merck and ProShares UltraShort

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Merck and ProShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Merck i.e., Merck and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Merck and ProShares UltraShort

Considering the 90-day investment horizon Merck Company is expected to generate 1.13 times more return on investment than ProShares UltraShort. However, Merck is 1.13 times more volatile than ProShares UltraShort SP500. It trades about 0.13 of its potential returns per unit of risk. ProShares UltraShort SP500 is currently generating about -0.23 per unit of risk. If you would invest  12,738  in Merck Company on December 30, 2023 and sell it today you would earn a total of  457.00  from holding Merck Company or generate 3.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  ProShares UltraShort SP500

 Performance 
       Timeline  
Merck Company 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Merck disclosed solid returns over the last few months and may actually be approaching a breakup point.
ProShares UltraShort 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ProShares UltraShort SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Merck and ProShares UltraShort Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and ProShares UltraShort

The main advantage of trading using opposite Merck and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.
The idea behind Merck Company and ProShares UltraShort SP500 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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