Correlation Between Dorian LPG and Merck
Can any of the company-specific risk be diversified away by investing in both Dorian LPG 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 Dorian LPG and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorian LPG and Merck Company, you can compare the effects of market volatilities on Dorian LPG 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 Dorian LPG with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorian LPG and Merck.
Diversification Opportunities for Dorian LPG and Merck
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dorian and Merck is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dorian LPG and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Dorian LPG 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 Dorian LPG 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 Dorian LPG i.e., Dorian LPG and Merck go up and down completely randomly.
Pair Corralation between Dorian LPG and Merck
Considering the 90-day investment horizon Dorian LPG is expected to under-perform the Merck. In addition to that, Dorian LPG is 1.56 times more volatile than Merck Company. It trades about -0.34 of its total potential returns per unit of risk. Merck Company is currently generating about -0.1 per unit of volatility. If you would invest 10,423 in Merck Company on August 28, 2024 and sell it today you would lose (307.00) from holding Merck Company or give up 2.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorian LPG vs. Merck Company
Performance |
| Timeline |
| Dorian LPG |
| Merck Company |
Dorian LPG and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorian LPG and Merck
The main advantage of trading using opposite Dorian LPG and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorian LPG 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.| Dorian LPG vs. DHT Holdings | Dorian LPG vs. Scorpio Tankers | Dorian LPG vs. Teekay Tankers | Dorian LPG vs. Torm PLC Class |
| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
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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