Correlation Between Merck and AMERICAN
Specify exactly 2 symbols:
By analyzing existing cross correlation between Merck Company and AMERICAN INTL GROUP, you can compare the effects of market volatilities on Merck and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and AMERICAN.
Diversification Opportunities for Merck and AMERICAN
Very good diversification
The 3 months correlation between Merck and AMERICAN is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and AMERICAN INTL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN INTL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN INTL GROUP has no effect on the direction of Merck i.e., Merck and AMERICAN go up and down completely randomly.
Pair Corralation between Merck and AMERICAN
Considering the 90-day investment horizon Merck Company is expected to generate 0.85 times more return on investment than AMERICAN. However, Merck Company is 1.17 times less risky than AMERICAN. It trades about -0.08 of its potential returns per unit of risk. AMERICAN INTL GROUP is currently generating about -0.19 per unit of risk. If you would invest 11,581 in Merck Company on July 2, 2024 and sell it today you would lose (212.00) from holding Merck Company or give up 1.83% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 65.0% |
Values | Daily Returns |
Merck Company vs. AMERICAN INTL GROUP
Performance |
Timeline |
Merck Company |
AMERICAN INTL GROUP |
Merck and AMERICAN Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and AMERICAN
The main advantage of trading using opposite Merck and AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, AMERICAN 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 AMERICAN will offset losses from the drop in AMERICAN's long position.The idea behind Merck Company and AMERICAN INTL GROUP 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.AMERICAN vs. Merit Medical Systems | AMERICAN vs. Reynolds Consumer Products | AMERICAN vs. American Airlines Group | AMERICAN vs. Alaska Air 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |