Correlation Between PetIQ and Merck
Can any of the company-specific risk be diversified away by investing in both PetIQ 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 PetIQ and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetIQ Inc and Merck Company, you can compare the effects of market volatilities on PetIQ 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 PetIQ with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetIQ and Merck.
Diversification Opportunities for PetIQ and Merck
Modest diversification
The 3 months correlation between PetIQ and Merck is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding PetIQ Inc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and PetIQ 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 PetIQ 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 PetIQ i.e., PetIQ and Merck go up and down completely randomly.
Pair Corralation between PetIQ and Merck
Given the investment horizon of 90 days PetIQ Inc is expected to under-perform the Merck. In addition to that, PetIQ is 2.27 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 0.17 per unit of volatility. If you would invest 10,117 in Merck Company on January 30, 2024 and sell it today you would earn a total of 3,003 from holding Merck Company or generate 29.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
PetIQ Inc vs. Merck Company
Performance |
Timeline |
PetIQ Inc |
Merck Company |
PetIQ and Merck Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PetIQ and Merck
The main advantage of trading using opposite PetIQ and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetIQ 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.PetIQ vs. Prestige Brand Holdings | PetIQ vs. Eagle Pharmaceuticals | PetIQ vs. Collegium Pharmaceutical | PetIQ vs. Silver Spike 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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