Correlation Between VanEck Vectors and Merck

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

Diversification Opportunities for VanEck Vectors and Merck

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between VanEck and Merck is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors Morningstar Glo and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and VanEck Vectors 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 VanEck Vectors Morningstar 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 VanEck Vectors i.e., VanEck Vectors and Merck go up and down completely randomly.

Pair Corralation between VanEck Vectors and Merck

Given the investment horizon of 90 days VanEck Vectors Morningstar is expected to generate 1.24 times more return on investment than Merck. However, VanEck Vectors is 1.24 times more volatile than Merck Company. It trades about 0.23 of its potential returns per unit of risk. Merck Company is currently generating about 0.26 per unit of risk. If you would invest  3,133  in VanEck Vectors Morningstar on August 31, 2022 and sell it today you would earn a total of  257.00  from holding VanEck Vectors Morningstar or generate 8.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

VanEck Vectors Morningstar Glo  vs.  Merck Company

 Performance (%) 
       Timeline  
VanEck Vectors Morni 
VanEck Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors Morningstar are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck Vectors is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Price Channel

Merck Company 
Merck Performance
23 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Merck demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Merck Price Channel

VanEck Vectors and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VanEck Vectors and Merck

The main advantage of trading using opposite VanEck Vectors and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Vectors 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.
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The idea behind VanEck Vectors Morningstar 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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