Correlation Between Merck and Azimut Exploration
Can any of the company-specific risk be diversified away by investing in both Merck and Azimut Exploration 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 Azimut Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Azimut Exploration, you can compare the effects of market volatilities on Merck and Azimut Exploration 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 Azimut Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Azimut Exploration.
Diversification Opportunities for Merck and Azimut Exploration
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Azimut is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Azimut Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azimut Exploration 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 Azimut Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azimut Exploration has no effect on the direction of Merck i.e., Merck and Azimut Exploration go up and down completely randomly.
Pair Corralation between Merck and Azimut Exploration
Considering the 90-day investment horizon Merck Company is expected to generate 0.24 times more return on investment than Azimut Exploration. However, Merck Company is 4.16 times less risky than Azimut Exploration. It trades about -0.1 of its potential returns per unit of risk. Azimut Exploration is currently generating about -0.05 per unit of risk. 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Azimut Exploration
Performance |
| Timeline |
| Merck Company |
| Azimut Exploration |
Merck and Azimut Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Azimut Exploration
The main advantage of trading using opposite Merck and Azimut Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Azimut Exploration 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 Azimut Exploration will offset losses from the drop in Azimut Exploration's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Azimut Exploration vs. Ascendant Resources | Azimut Exploration vs. Cantex Mine Development | Azimut Exploration vs. Amarc Resources | Azimut Exploration vs. Sterling Metals Corp |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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