Correlation Between Merck and Twitter

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Merck and Twitter 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 Twitter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Twitter, you can compare the effects of market volatilities on Merck and Twitter 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 Twitter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Twitter.

Diversification Opportunities for Merck and Twitter

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Merck and Twitter is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter 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 Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of Merck i.e., Merck and Twitter go up and down completely randomly.

Pair Corralation between Merck and Twitter

Considering the 90-day investment horizon Merck Company is expected to generate 0.45 times more return on investment than Twitter. However, Merck Company is 2.23 times less risky than Twitter. It trades about 0.09 of its potential returns per unit of risk. Twitter is currently generating about -0.1 per unit of risk. If you would invest  8,610  in Merck Company on April 7, 2022 and sell it today you would earn a total of  654.00  from holding Merck Company or generate 7.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  Twitter

 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

Twitter 
Twitter Performance
0 of 100
Over the last 90 days Twitter 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 invariable which may send shares a bit higher in August 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Twitter Price Channel

Merck and Twitter Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Merck and Twitter

The main advantage of trading using opposite Merck and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Twitter 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 Twitter will offset losses from the drop in Twitter's long position.
The idea behind Merck Company and Twitter 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 Transaction History module to view history of all your transactions and understand their impact on performance.

Other Complementary Tools

Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Fundamental Analysis
View fundamental data based on most recent published financial statements
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Go
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Go
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Go