Correlation Between Merck and Exxon
Can any of the company-specific risk be diversified away by investing in both Merck and Exxon 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 Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Exxon Mobil Corp, you can compare the effects of market volatilities on Merck and Exxon 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 Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Exxon.
Diversification Opportunities for Merck and Exxon
Very weak diversification
The 3 months correlation between Merck and Exxon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Merck i.e., Merck and Exxon go up and down completely randomly.
Pair Corralation between Merck and Exxon
Considering the 90-day investment horizon Merck is expected to generate 3.82 times less return on investment than Exxon. In addition to that, Merck is 1.57 times more volatile than Exxon Mobil Corp. It trades about 0.05 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.28 per unit of volatility. If you would invest 11,299 in Exxon Mobil Corp on January 20, 2024 and sell it today you would earn a total of 553.00 from holding Exxon Mobil Corp or generate 4.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Exxon Mobil Corp
Performance |
| Timeline |
| Merck Company |
| Exxon Mobil Corp |
Merck and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Exxon
The main advantage of trading using opposite Merck and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| Merck vs. Alkermes Plc | Merck vs. Ironwood Pharmaceuticals | Merck vs. Deciphera Pharmaceuticals LLC | Merck vs. Eagle Pharmaceuticals |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |