Correlation Between Eaton Vance and Merck

Can any of the company-specific risk be diversified away by investing in both Eaton Vance 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 Eaton Vance and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eaton Vance Special and Merck Company, you can compare the effects of market volatilities on Eaton Vance 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 Eaton Vance with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Merck.

Diversification Opportunities for Eaton Vance and Merck

-0.56

Correlation Coefficient

Eaton Vance  Merck

Excellent diversification

The 3 months correlation between Eaton and Merck is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Special and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Eaton Vance 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 Eaton Vance Special 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 Eaton Vance i.e., Eaton Vance and Merck go up and down completely randomly.

Pair Corralation between Eaton Vance and Merck

If you would invest  12,531  in Merck Company on January 25, 2024 and sell it today you would earn a total of  169.00  from holding Merck Company or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Eaton Vance Special  vs.  Merck Company

Eaton Vance Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Special has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Eaton Vance 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Eaton Vance and Merck

The main advantage of trading using opposite Eaton Vance and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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 Eaton Vance Special 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.