Correlation Between Merck and Sentinelone Inc

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

Diversification Opportunities for Merck and Sentinelone Inc

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Merck and Sentinelone is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Sentinelone Inc Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinelone Inc 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 Sentinelone Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinelone Inc has no effect on the direction of Merck i.e., Merck and Sentinelone Inc go up and down completely randomly.

Pair Corralation between Merck and Sentinelone Inc

Considering the 90-day investment horizon Merck is expected to generate 2.61 times less return on investment than Sentinelone Inc. But when comparing it to its historical volatility, Merck Company is 2.68 times less risky than Sentinelone Inc. It trades about 0.03 of its potential returns per unit of risk. Sentinelone Inc Cl is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,529  in Sentinelone Inc Cl on July 4, 2022 and sell it today you would earn a total of  27.00  from holding Sentinelone Inc Cl or generate 1.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  Sentinelone Inc Cl

 Performance (%) 
       Timeline  
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

Sentinelone Inc 
Sentinelone Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sentinelone Inc Cl are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Sentinelone Inc may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Sentinelone Price Channel

Merck and Sentinelone Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Sentinelone Inc

The main advantage of trading using opposite Merck and Sentinelone Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Sentinelone Inc 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 Sentinelone Inc will offset losses from the drop in Sentinelone Inc's long position.
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The idea behind Merck Company and Sentinelone Inc Cl 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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