Correlation Between Merck and Twitter
Can any of the company-specific risk be diversified away by investing in both Merck and Twitter 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 Twitter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Twitter, you can compare the effects of market volatilities on Merck and Twitter 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 Twitter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Twitter.
Diversification Opportunities for Merck and Twitter
Weak diversification
The 3 months correlation between Merck and Twitter is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter 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 Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of Merck i.e., Merck and Twitter go up and down completely randomly.
Pair Corralation between Merck and Twitter
If you would invest 11,814 in Merck Company on December 20, 2023 and sell it today you would earn a total of 330.00 from holding Merck Company or generate 2.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 2.44% |
Values | Daily Returns |
Merck Company vs. Twitter
Performance |
Timeline |
Merck Company |
Risk-Adjusted Performance
0 of 100
Low | High |
Very Weak
Merck and Twitter Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and Twitter
The main advantage of trading using opposite Merck and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Twitter 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 Twitter will offset losses from the drop in Twitter's long position.The idea behind Merck Company and Twitter 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.Twitter vs. Celsius Holdings | Twitter vs. National Beverage Corp | Twitter vs. Diageo PLC ADR | Twitter vs. Primo Water Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Technical Analysis Check basic technical indicators and analysis based on most latest market data |