Correlation Between Merck and Exxon
Can any of the company-specific risk be diversified away by investing in both Merck and Exxon 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 Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Exxon Mobil Corp, you can compare the effects of market volatilities on Merck and Exxon 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 Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Exxon.
Diversification Opportunities for Merck and Exxon
Poor diversification
The 3 months correlation between Merck and Exxon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Merck i.e., Merck and Exxon go up and down completely randomly.
Pair Corralation between Merck and Exxon
Considering the 90-day investment horizon Merck Company is expected to under-perform the Exxon. In addition to that, Merck is 1.11 times more volatile than Exxon Mobil Corp. It trades about -0.06 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.0 per unit of volatility. If you would invest 11,553 in Exxon Mobil Corp on March 25, 2025 and sell it today you would lose (83.00) from holding Exxon Mobil Corp or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Exxon Mobil Corp
Performance |
| Timeline |
| Merck Company |
| Exxon Mobil Corp |
Merck and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Exxon
The main advantage of trading using opposite Merck and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Thrivent High Yield | Merck vs. First Guaranty Bancshares |
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 the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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