Correlation Between Gold Fields and Merck
Can any of the company-specific risk be diversified away by investing in both Gold Fields 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 Gold Fields and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and Merck Company, you can compare the effects of market volatilities on Gold Fields 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 Gold Fields with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Merck.
Diversification Opportunities for Gold Fields and Merck
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gold and Merck is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and Merck go up and down completely randomly.
Pair Corralation between Gold Fields and Merck
Considering the 90-day investment horizon Gold Fields Ltd is expected to under-perform the Merck. In addition to that, Gold Fields is 2.65 times more volatile than Merck Company. It trades about -0.33 of its total potential returns per unit of risk. Merck Company is currently generating about -0.3 per unit of volatility. If you would invest 10,664 in Merck Company on August 23, 2024 and sell it today you would lose (816.00) from holding Merck Company or give up 7.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. Merck Company
Performance |
| Timeline |
| Gold Fields |
| Merck Company |
Gold Fields and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and Merck
The main advantage of trading using opposite Gold Fields and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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.| Gold Fields vs. Agnico Eagle Mines | Gold Fields vs. Pan American Silver | Gold Fields vs. Kinross Gold | Gold Fields vs. B2Gold Corp |
| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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