Correlation Between Tesla and Merck
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Merck Company, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Merck.
Diversification Opportunities for Tesla and Merck
Very good diversification
The 3 months correlation between Tesla and Merck is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Merck go up and down completely randomly.
Pair Corralation between Tesla and Merck
Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Merck. In addition to that, Tesla is 2.08 times more volatile than Merck Company. It trades about -0.12 of its total potential returns per unit of risk. Merck Company is currently generating about 0.15 per unit of volatility. If you would invest 12,144 in Merck Company on January 17, 2024 and sell it today you would earn a total of 475.00 from holding Merck Company or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Merck Company
Performance |
| Timeline |
| Tesla Inc |
| Merck Company |
Tesla and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Merck
The main advantage of trading using opposite Tesla and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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.| Tesla vs. Hycroft Mining Holding | Tesla vs. Exela Technologies | Tesla vs. Aquagold International | Tesla vs. Thrivent High Yield |
| Merck vs. PetIQ Inc | Merck vs. Emergent Biosolutions | Merck vs. Neurocrine Biosciences | Merck vs. Haleon plc |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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