Correlation Between Merck and Boeing

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

Diversification Opportunities for Merck and Boeing

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Merck and Boeing is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Merck i.e., Merck and Boeing go up and down completely randomly.

Pair Corralation between Merck and Boeing

Considering the 90-day investment horizon Merck Company is expected to under-perform the Boeing. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.17 times less risky than Boeing. The stock trades about -0.4 of its potential returns per unit of risk. The The Boeing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  14,937  in The Boeing on August 10, 2024 and sell it today you would earn a total of  161.00  from holding The Boeing or generate 1.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  The Boeing

 Performance 
       Timeline  
Merck Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
Boeing 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Merck and Boeing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Boeing

The main advantage of trading using opposite Merck and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.
The idea behind Merck Company and The Boeing 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

Other Complementary Tools

Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope