Correlation Between Mainstay Moderate and Merck

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

Diversification Opportunities for Mainstay Moderate and Merck

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Mainstay and Merck is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Moderate Etf and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Mainstay Moderate 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 Mainstay Moderate Etf 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 Mainstay Moderate i.e., Mainstay Moderate and Merck go up and down completely randomly.

Pair Corralation between Mainstay Moderate and Merck

Assuming the 90 days horizon Mainstay Moderate Etf is expected to generate 0.39 times more return on investment than Merck. However, Mainstay Moderate Etf is 2.53 times less risky than Merck. It trades about 0.21 of its potential returns per unit of risk. Merck Company is currently generating about 0.02 per unit of risk. If you would invest  1,204  in Mainstay Moderate Etf on March 24, 2024 and sell it today you would earn a total of  22.00  from holding Mainstay Moderate Etf or generate 1.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Mainstay Moderate Etf  vs.  Merck Company

 Performance 
       Timeline  
Mainstay Moderate Etf 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Moderate Etf are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mainstay Moderate 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

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.

Mainstay Moderate and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mainstay Moderate and Merck

The main advantage of trading using opposite Mainstay Moderate and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstay Moderate 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 Mainstay Moderate Etf 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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