Correlation Between Baker Steel and Merck
Can any of the company-specific risk be diversified away by investing in both Baker Steel 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 Baker Steel and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and Merck Company, you can compare the effects of market volatilities on Baker Steel 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 Baker Steel with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and Merck.
Diversification Opportunities for Baker Steel and Merck
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Baker and Merck is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Baker Steel 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 Baker Steel Resources 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 Baker Steel i.e., Baker Steel and Merck go up and down completely randomly.
Pair Corralation between Baker Steel and Merck
Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 0.44 times more return on investment than Merck. However, Baker Steel Resources is 2.28 times less risky than Merck. It trades about 0.17 of its potential returns per unit of risk. Merck Company is currently generating about -0.21 per unit of risk. If you would invest 5,400 in Baker Steel Resources on September 14, 2024 and sell it today you would earn a total of 400.00 from holding Baker Steel Resources or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. Merck Company
Performance |
| Timeline |
| Baker Steel Resources |
| Merck Company |
Baker Steel and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and Merck
The main advantage of trading using opposite Baker Steel and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel 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.| Baker Steel vs. Catalyst Media Group | Baker Steel vs. CATLIN GROUP | Baker Steel vs. Tamburi Investment Partners | Baker Steel vs. Magnora ASA |
| Merck vs. Ironveld Plc | Merck vs. Discover Financial Services | Merck vs. Baker Steel Resources | Merck vs. Royal Bank of |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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