Correlation Between Merck and Exchange Traded

Can any of the company-specific risk be diversified away by investing in both Merck and Exchange Traded 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 Exchange Traded into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and Exchange Traded Concepts, you can compare the effects of market volatilities on Merck and Exchange Traded 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 Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Exchange Traded.

Diversification Opportunities for Merck and Exchange Traded

0.27

Correlation Coefficient

Merck  Exchange Traded

Modest diversification

The 3 months correlation between Merck and Exchange is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Merck i.e., Merck and Exchange Traded go up and down completely randomly.

Pair Corralation between Merck and Exchange Traded

Considering the 90-day investment horizon Merck Company is expected to under-perform the Exchange Traded. In addition to that, Merck is 12.52 times more volatile than Exchange Traded Concepts. It trades about -0.03 of its total potential returns per unit of risk. Exchange Traded Concepts is currently generating about -0.01 per unit of volatility. If you would invest  2,505  in Exchange Traded Concepts on May 3, 2025 and sell it today you would lose (1.00) from holding Exchange Traded Concepts or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	47.54%
Values	Daily Returns

Merck Company  vs.  Exchange Traded Concepts

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Exchange Traded Concepts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Exchange Traded is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merck and Exchange Traded

The main advantage of trading using opposite Merck and Exchange Traded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Exchange Traded 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 Exchange Traded will offset losses from the drop in Exchange Traded's long position.

The idea behind Merck Company and Exchange Traded Concepts 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.