Correlation Between Merck and Champion Bear
Can any of the company-specific risk be diversified away by investing in both Merck and Champion Bear 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 Champion Bear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Champion Bear Resources, you can compare the effects of market volatilities on Merck and Champion Bear 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 Champion Bear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Champion Bear.
Diversification Opportunities for Merck and Champion Bear
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Champion is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Champion Bear Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Bear Resources 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 Champion Bear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Bear Resources has no effect on the direction of Merck i.e., Merck and Champion Bear go up and down completely randomly.
Pair Corralation between Merck and Champion Bear
Considering the 90-day investment horizon Merck is expected to generate 4247.67 times less return on investment than Champion Bear. But when comparing it to its historical volatility, Merck Company is 26.75 times less risky than Champion Bear. It trades about 0.0 of its potential returns per unit of risk. Champion Bear Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Champion Bear Resources on August 31, 2024 and sell it today you would lose (11.00) from holding Champion Bear Resources or give up 73.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Merck Company vs. Champion Bear Resources
Performance |
| Timeline |
| Merck Company |
| Champion Bear Resources |
Merck and Champion Bear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Champion Bear
The main advantage of trading using opposite Merck and Champion Bear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Champion Bear 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 Champion Bear will offset losses from the drop in Champion Bear's long position.The idea behind Merck Company and Champion Bear Resources 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.| Champion Bear vs. Liontown Resources Limited | Champion Bear vs. ATT Inc | Champion Bear vs. Merck Company | Champion Bear vs. Walt Disney |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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