Correlation Between Embecta Corp and Merck
Can any of the company-specific risk be diversified away by investing in both Embecta Corp 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 Embecta Corp and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embecta Corp and Merck Company, you can compare the effects of market volatilities on Embecta Corp 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 Embecta Corp with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embecta Corp and Merck.
Diversification Opportunities for Embecta Corp and Merck
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Embecta and Merck is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Embecta Corp 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 Embecta Corp 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 Embecta Corp i.e., Embecta Corp and Merck go up and down completely randomly.
Pair Corralation between Embecta Corp and Merck
Given the investment horizon of 90 days Embecta Corp is expected to under-perform the Merck. In addition to that, Embecta Corp is 2.6 times more volatile than Merck Company. It trades about -0.07 of its total potential returns per unit of risk. Merck Company is currently generating about 0.09 per unit of volatility. If you would invest 8,689 in Merck Company on February 1, 2024 and sell it today you would earn a total of 4,233 from holding Merck Company or generate 48.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Embecta Corp vs. Merck Company
Performance |
Timeline |
Embecta Corp |
Merck Company |
Embecta Corp and Merck Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Embecta Corp and Merck
The main advantage of trading using opposite Embecta Corp and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embecta Corp 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.Embecta Corp vs. Novo Integrated Sciences | Embecta Corp vs. HCA Holdings | Embecta Corp vs. Acadia Healthcare | Embecta Corp vs. Pennant Group |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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