Correlation Between Merck and JetBlue Airways
Can any of the company-specific risk be diversified away by investing in both Merck and JetBlue Airways 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 JetBlue Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and JetBlue Airways Corp, you can compare the effects of market volatilities on Merck and JetBlue Airways 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 JetBlue Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and JetBlue Airways.
Diversification Opportunities for Merck and JetBlue Airways
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and JetBlue is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and JetBlue Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways Corp 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways Corp has no effect on the direction of Merck i.e., Merck and JetBlue Airways go up and down completely randomly.
Pair Corralation between Merck and JetBlue Airways
Considering the 90-day investment horizon Merck Company is expected to under-perform the JetBlue Airways. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.94 times less risky than JetBlue Airways. The stock trades about -0.12 of its potential returns per unit of risk. The JetBlue Airways Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 607.00 in JetBlue Airways Corp on July 21, 2024 and sell it today you would earn a total of 198.00 from holding JetBlue Airways Corp or generate 32.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Merck Company vs. JetBlue Airways Corp
Performance |
Timeline |
Merck Company |
JetBlue Airways Corp |
Merck and JetBlue Airways Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and JetBlue Airways
The main advantage of trading using opposite Merck and JetBlue Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, JetBlue Airways 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 JetBlue Airways will offset losses from the drop in JetBlue Airways' long position.Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Coca Cola Consolidated | Merck vs. Antero Midstream Partners |
JetBlue Airways vs. Frontier Group Holdings | JetBlue Airways vs. Southwest Airlines | JetBlue Airways vs. United Airlines Holdings | JetBlue Airways vs. American Airlines 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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