diversifiable risk of combining Agilent Technologies and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agilent Technologies and Merck Company, you can compare the effects of market volatilities on Agilent Technologies 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 Agilent Technologies with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agilent Technologies and Merck.
Diversification Opportunities for Agilent Technologies and Merck
Pair Corralation between Agilent Technologies and Merck
Taking into account the 90-day investment horizon Agilent Technologies is expected to generate 1.64 times less return on investment than Merck. In addition to that, Agilent Technologies is 1.58 times more volatile than Merck Company. It trades about 0.1 of its total potential returns per unit of risk. Merck Company is currently generating about 0.27 per unit of volatility. If you would invest 11,477 in Merck Company on December 4, 2023 and sell it today you would earn a total of 1,219 from holding Merck Company or generate 10.62% return on investment over 90 days.
Agilent Technologies vs. Merck Company
Agilent Technologies and Merck Volatility Contrast
Pair Trading with Agilent Technologies and MerckThe main advantage of trading using opposite Agilent Technologies and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agilent Technologies 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 Agilent Technologies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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