Correlation Between ATT and Merck

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Merck Company, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Merck.

Diversification Opportunities for ATT and Merck

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ATT and Merck is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and ATT 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 ATT Inc 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 ATT i.e., ATT and Merck go up and down completely randomly.

Pair Corralation between ATT and Merck

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the Merck. In addition to that, ATT is 1.6 times more volatile than Merck Company. It trades about -0.02 of its total potential returns per unit of risk. Merck Company is currently generating about 0.27 per unit of volatility. If you would invest  11,477  in Merck Company on December 4, 2023 and sell it today you would earn a total of  1,219  from holding Merck Company or generate 10.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  Merck Company

 Performance 
       Timeline  
ATT Inc 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Merck Company 

Risk-Adjusted Performance

24 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Merck disclosed solid returns over the last few months and may actually be approaching a breakup point.

ATT and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Merck

The main advantage of trading using opposite ATT and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

Other Complementary Tools

Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
ETFs
Find actively traded Exchange Traded Funds (ETF) from around the world
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
FinTech Suite
Use AI to screen and filter profitable investment opportunities