Correlation Between Harbor Core and Merck

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

Diversification Opportunities for Harbor Core and Merck

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Harbor and Merck is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Core Bond and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Harbor Core 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 Harbor Core Bond 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 Harbor Core i.e., Harbor Core and Merck go up and down completely randomly.

Pair Corralation between Harbor Core and Merck

Assuming the 90 days horizon Harbor Core Bond is expected to under-perform the Merck. But the mutual fund apears to be less risky and, when comparing its historical volatility, Harbor Core Bond is 4.03 times less risky than Merck. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Merck Company is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,395  in Merck Company on May 12, 2022 and sell it today you would earn a total of  1,522  from holding Merck Company or generate 20.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Harbor Core Bond  vs.  Merck Company

 Performance (%) 
       Timeline  
Harbor Core Bond 
Harbor Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Core Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Harbor Core is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Harbor 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 current stock price confusion, may contribute to short-horizon losses for the traders.

Merck Price Channel

Harbor Core and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Harbor Core and Merck

The main advantage of trading using opposite Harbor Core and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbor Core 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.

Harbor Core Bond

Pair trading matchups for Harbor Core

The idea behind Harbor Core Bond 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.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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