Correlation Between Adams Resources and Merck
Can any of the company-specific risk be diversified away by investing in both Adams Resources and Merck 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 Adams Resources and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Resources Energy and Merck Company, you can compare the effects of market volatilities on Adams Resources and Merck 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 Adams Resources with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Resources and Merck.
Diversification Opportunities for Adams Resources and Merck
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Adams and Merck is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Adams Resources 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 Adams Resources Energy are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Adams Resources i.e., Adams Resources and Merck go up and down completely randomly.
Pair Corralation between Adams Resources and Merck
Allowing for the 90-day total investment horizon Adams Resources Energy is expected to generate 5.87 times more return on investment than Merck. However, Adams Resources is 5.87 times more volatile than Merck Company. It trades about 0.23 of its potential returns per unit of risk. Merck Company is currently generating about -0.16 per unit of risk. If you would invest 2,657 in Adams Resources Energy on August 24, 2024 and sell it today you would earn a total of 1,067 from holding Adams Resources Energy or generate 40.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Resources Energy vs. Merck Company
Performance |
| Timeline |
| Adams Resources Energy |
| Merck Company |
Adams Resources and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Resources and Merck
The main advantage of trading using opposite Adams Resources and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Resources position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Adams Resources vs. PrimeEnergy | Adams Resources vs. Barnwell Industries | Adams Resources vs. Acme United | Adams Resources vs. CKX Lands |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |