Correlation Between Merck and Macys
Can any of the company-specific risk be diversified away by investing in both Merck and Macys 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 Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Macys Inc, you can compare the effects of market volatilities on Merck and Macys 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 Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Macys.
Diversification Opportunities for Merck and Macys
Significant diversification
The 3 months correlation between Merck and Macys is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Merck i.e., Merck and Macys go up and down completely randomly.
Pair Corralation between Merck and Macys
Considering the 90-day investment horizon Merck Company is expected to generate 0.56 times more return on investment than Macys. However, Merck Company is 1.79 times less risky than Macys. It trades about 0.05 of its potential returns per unit of risk. Macys Inc is currently generating about -0.2 per unit of risk. If you would invest 12,385 in Merck Company on January 20, 2024 and sell it today you would earn a total of 138.00 from holding Merck Company or generate 1.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Merck Company vs. Macys Inc
Performance |
Timeline |
Merck Company |
Macys Inc |
Merck and Macys Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and Macys
The main advantage of trading using opposite Merck and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Macys 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 Macys will offset losses from the drop in Macys' long position.Merck vs. Alkermes Plc | Merck vs. Ironwood Pharmaceuticals | Merck vs. Deciphera Pharmaceuticals LLC | Merck vs. Eagle Pharmaceuticals |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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