Correlation Between Franklin Genomic and Merck

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

Diversification Opportunities for Franklin Genomic and Merck

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Franklin and Merck is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Genomic Advancements and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Franklin Genomic 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 Franklin Genomic Advancements 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 Franklin Genomic i.e., Franklin Genomic and Merck go up and down completely randomly.

Pair Corralation between Franklin Genomic and Merck

Given the investment horizon of 90 days Franklin Genomic Advancements is expected to generate 0.91 times more return on investment than Merck. However, Franklin Genomic Advancements is 1.1 times less risky than Merck. It trades about 0.13 of its potential returns per unit of risk. Merck Company is currently generating about 0.08 per unit of risk. If you would invest  2,984  in Franklin Genomic Advancements on March 23, 2024 and sell it today you would earn a total of  156.00  from holding Franklin Genomic Advancements or generate 5.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Franklin Genomic Advancements  vs.  Merck Company

 Performance 
       Timeline  
Franklin Genomic Adv 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Franklin Genomic Advancements has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Franklin Genomic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Merck Company 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Franklin Genomic and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Genomic and Merck

The main advantage of trading using opposite Franklin Genomic and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Genomic 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 Franklin Genomic Advancements 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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