Correlation Between Merck and JP Morgan

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

Diversification Opportunities for Merck and JP Morgan

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Merck and JP Morgan is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and JP Morgan Chase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Chase 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 JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Chase has no effect on the direction of Merck i.e., Merck and JP Morgan go up and down completely randomly.

Pair Corralation between Merck and JP Morgan

Considering the 90-day investment horizon Merck Company is expected to generate 0.94 times more return on investment than JP Morgan. However, Merck Company is 1.06 times less risky than JP Morgan. It trades about 0.12 of its potential returns per unit of risk. JP Morgan Chase is currently generating about -0.38 per unit of risk. If you would invest  8,911  in Merck Company on April 7, 2022 and sell it today you would earn a total of  353.00  from holding Merck Company or generate 3.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  JP Morgan Chase

 Performance (%) 
      Timeline 
Merck Company 
Merck Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Merck Price Channel

JP Morgan Chase 
JP Morgan Performance
0 of 100
Over the last 90 days JP Morgan Chase has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in August 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0351
Payout Ratio
0.3
Last Split Factor
3:2
Forward Annual Dividend Rate
4.0
Dividend Date
2022-07-31
Ex Dividend Date
2022-07-05
Last Split Date
2000-06-12

JP Morgan Price Channel

Merck and JP Morgan Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Merck and JP Morgan

The main advantage of trading using opposite Merck and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, JP Morgan 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 JP Morgan will offset losses from the drop in JP Morgan's long position.
The idea behind Merck Company and JP Morgan Chase 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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