Correlation Between Merck and Uber Technologies

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

Diversification Opportunities for Merck and Uber Technologies

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Merck and Uber Technologies is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Merck i.e., Merck and Uber Technologies go up and down completely randomly.

Pair Corralation between Merck and Uber Technologies

Considering the 90-day investment horizon Merck Company is expected to generate 0.41 times more return on investment than Uber Technologies. However, Merck Company is 2.44 times less risky than Uber Technologies. It trades about 0.05 of its potential returns per unit of risk. Uber Technologies is currently generating about -0.01 per unit of risk. If you would invest  6,897  in Merck Company on April 4, 2022 and sell it today you would earn a total of  2,345  from holding Merck Company or generate 34.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  Uber Technologies

 Performance (%) 
      Timeline 
Merck Company 
Merck Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 9 (%) 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.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0299
Payout Ratio
0.39
Last Split Factor
1048:1000
Forward Annual Dividend Rate
2.76
Dividend Date
2022-07-08
Ex Dividend Date
2022-06-14
Last Split Date
2021-06-03

Merck Price Channel

Uber Technologies 
Uber Technologies Performance
0 of 100
Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with sluggish performance in the last few months, the Stock's technical and fundamental 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.

Uber Technologies Price Channel

Merck and Uber Technologies Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Merck and Uber Technologies

The main advantage of trading using opposite Merck and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.
The idea behind Merck Company and Uber Technologies 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.

Uber Technologies

Pair trading matchups for Uber Technologies

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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