Correlation Between ATT and Merck

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

Diversification Opportunities for ATT and Merck

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ATT and Merck is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and ATT 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 ATT 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 ATT i.e., ATT and Merck go up and down completely randomly.

Pair Corralation between ATT and Merck

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the Merck. In addition to that, ATT is 1.06 times more volatile than Merck Company. It trades about -0.03 of its total potential returns per unit of risk. Merck Company is currently generating about 0.04 per unit of volatility. If you would invest  7,213  in Merck Company on July 7, 2022 and sell it today you would earn a total of  1,626  from holding Merck Company or generate 22.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  Merck Company

 Performance (%) 
       Timeline  
ATT Inc 
ATT Performance
0 of 100
Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in November 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ATT Price Channel

Merck Company 
Merck Performance
0 of 100
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Merck is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Merck Price Channel

ATT and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Merck

The main advantage of trading using opposite ATT and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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.
ATT vs. Amazon Inc
The idea behind ATT Inc and Merck Company 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.
Merck vs. Amazon Inc
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

Other Complementary Tools

Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Go
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Go
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Go
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go