diversifiable risk of combining Uber Technologies and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Uber Technologies and Merck Company, you can compare the effects of market volatilities on Uber Technologies 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 Uber Technologies with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uber Technologies and Merck.
Diversification Opportunities for Uber Technologies and Merck
Pair Corralation between Uber Technologies and Merck
Given the investment horizon of 90 days Uber Technologies is expected to generate 6.63 times more return on investment than Merck. However, Uber Technologies is 6.63 times more volatile than Merck Company. It trades about 0.25 of its potential returns per unit of risk. Merck Company is currently generating about 0.04 per unit of risk. If you would invest 6,807 in Uber Technologies on December 4, 2023 and sell it today you would earn a total of 1,296 from holding Uber Technologies or generate 19.04% return on investment over 90 days.
Uber Technologies vs. Merck Company
Uber Technologies and Merck Volatility Contrast
Pair Trading with Uber Technologies and MerckThe main advantage of trading using opposite Uber Technologies and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber Technologies 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 Uber Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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