Correlation Between Merck and Canaan
Can any of the company-specific risk be diversified away by investing in both Merck and Canaan 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 Canaan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Canaan Inc, you can compare the effects of market volatilities on Merck and Canaan 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 Canaan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Canaan.
Diversification Opportunities for Merck and Canaan
Pay attention - limited upside
The 3 months correlation between Merck and Canaan is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Canaan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaan Inc 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 Canaan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaan Inc has no effect on the direction of Merck i.e., Merck and Canaan go up and down completely randomly.
Pair Corralation between Merck and Canaan
Considering the 90-day investment horizon Merck Company is expected to under-perform the Canaan. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 9.37 times less risky than Canaan. The stock trades about -0.1 of its potential returns per unit of risk. The Canaan Inc is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 106.00 in Canaan Inc on August 28, 2024 and sell it today you would earn a total of 102.00 from holding Canaan Inc or generate 96.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Canaan Inc
Performance |
| Timeline |
| Merck Company |
| Canaan Inc |
Merck and Canaan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Canaan
The main advantage of trading using opposite Merck and Canaan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Canaan 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 Canaan will offset losses from the drop in Canaan's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Canaan vs. 3D Systems | Canaan vs. NetApp Inc | Canaan vs. Rigetti Computing | Canaan vs. Logitech International SA |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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