Correlation Between Merck and Select Fund

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

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

Diversification Opportunities for Merck and Select Fund

0.0

Correlation Coefficient

Merck  Select Fund

Pay attention - limited upside

The 3 months correlation between Merck and Select is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Select Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund C and Merck 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 Merck Company are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund C has no effect on the direction of Merck i.e., Merck and Select Fund go up and down completely randomly.

Pair Corralation between Merck and Select Fund

If you would invest  10,801  in Merck Company on March 16, 2024 and sell it today you would earn a total of  2,136  from holding Merck Company or generate 19.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Merck Company  vs.  Select Fund C

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 sluggish basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Select Fund C

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with Merck and Select Fund

The main advantage of trading using opposite Merck and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.

The idea behind Merck Company and Select Fund C 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.