Correlation Between Merck and Altiplano Metals
Can any of the company-specific risk be diversified away by investing in both Merck and Altiplano Metals 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 Altiplano Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Altiplano Metals, you can compare the effects of market volatilities on Merck and Altiplano Metals 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 Altiplano Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Altiplano Metals.
Diversification Opportunities for Merck and Altiplano Metals
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Altiplano is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Altiplano Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altiplano Metals 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 Altiplano Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altiplano Metals has no effect on the direction of Merck i.e., Merck and Altiplano Metals go up and down completely randomly.
Pair Corralation between Merck and Altiplano Metals
Considering the 90-day investment horizon Merck Company is expected to generate 0.2 times more return on investment than Altiplano Metals. However, Merck Company is 5.07 times less risky than Altiplano Metals. It trades about -0.16 of its potential returns per unit of risk. Altiplano Metals is currently generating about -0.14 per unit of risk. If you would invest 11,581 in Merck Company on September 2, 2024 and sell it today you would lose (1,417) from holding Merck Company or give up 12.24% 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. Altiplano Metals
Performance |
| Timeline |
| Merck Company |
| Altiplano Metals |
Merck and Altiplano Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Altiplano Metals
The main advantage of trading using opposite Merck and Altiplano Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Altiplano Metals 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 Altiplano Metals will offset losses from the drop in Altiplano Metals' long position.The idea behind Merck Company and Altiplano Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Altiplano Metals vs. ATT Inc | Altiplano Metals vs. Merck Company | Altiplano Metals vs. Walt Disney | Altiplano Metals vs. Caterpillar |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |