Correlation Between Polaris Industries and Merck
Can any of the company-specific risk be diversified away by investing in both Polaris Industries and Merck 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 Polaris Industries and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polaris Industries and Merck Company, you can compare the effects of market volatilities on Polaris Industries and Merck 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 Polaris Industries with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polaris Industries and Merck.
Diversification Opportunities for Polaris Industries and Merck
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Polaris and Merck is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Industries and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Polaris Industries 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 Polaris Industries are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Polaris Industries i.e., Polaris Industries and Merck go up and down completely randomly.
Pair Corralation between Polaris Industries and Merck
Considering the 90-day investment horizon Polaris Industries is expected to under-perform the Merck. In addition to that, Polaris Industries is 1.74 times more volatile than Merck Company. It trades about -0.11 of its total potential returns per unit of risk. Merck Company is currently generating about 0.11 per unit of volatility. If you would invest 10,420 in Merck Company on January 24, 2024 and sell it today you would earn a total of 2,274 from holding Merck Company or generate 21.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polaris Industries vs. Merck Company
Performance |
| Timeline |
| Polaris Industries |
| Merck Company |
Polaris Industries and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polaris Industries and Merck
The main advantage of trading using opposite Polaris Industries and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polaris Industries position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Polaris Industries vs. Cedar Fair LP | Polaris Industries vs. Six Flags Entertainment | Polaris Industries vs. Leatt Corp |
| Merck vs. Silver Spike Investment | Merck vs. Alkermes Plc | Merck vs. Eagle Pharmaceuticals | Merck vs. Evotec SE ADR |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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