Correlation Between Zacks Market and Merck

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

Diversification Opportunities for Zacks Market and Merck

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Zacks and Merck is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Zacks Market Neutral and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Zacks Market 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 Zacks Market Neutral 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 Zacks Market i.e., Zacks Market and Merck go up and down completely randomly.

Pair Corralation between Zacks Market and Merck

If you would invest  8,185  in Merck Company on December 30, 2023 and sell it today you would earn a total of  5,010  from holding Merck Company or generate 61.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Zacks Market Neutral  vs.  Merck Company

 Performance 
       Timeline  
Zacks Market Neutral 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Zacks Market Neutral has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Zacks Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
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.

Zacks Market and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zacks Market and Merck

The main advantage of trading using opposite Zacks Market and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zacks Market 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.
The idea behind Zacks Market Neutral and Merck Company 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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