Correlation Between Ameriprise Financial and Merck

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

Diversification Opportunities for Ameriprise Financial and Merck

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Ameriprise and Merck is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial Services and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Ameriprise Financial 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 Ameriprise Financial Services 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 Ameriprise Financial i.e., Ameriprise Financial and Merck go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Merck

Considering the 90-day investment horizon Ameriprise Financial Services is expected to under-perform the Merck. In addition to that, Ameriprise Financial is 1.66 times more volatile than Merck Company. It trades about -0.05 of its total potential returns per unit of risk. Merck Company is currently generating about 0.03 per unit of volatility. If you would invest  8,349  in Merck Company on July 1, 2022 and sell it today you would earn a total of  315.00  from holding Merck Company or generate 3.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ameriprise Financial Services  vs.  Merck Company

 Performance (%) 
       Timeline  
Ameriprise Financial 
Ameriprise Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Ameriprise Financial may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Ameriprise 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

Ameriprise Financial and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ameriprise Financial and Merck

The main advantage of trading using opposite Ameriprise Financial and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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.
Ameriprise Financial vs. Boeing Company
The idea behind Ameriprise Financial Services 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.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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