Correlation Between Merck and Canfor Pulp
Can any of the company-specific risk be diversified away by investing in both Merck and Canfor Pulp 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 Canfor Pulp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Canfor Pulp Products, you can compare the effects of market volatilities on Merck and Canfor Pulp 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 Canfor Pulp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Canfor Pulp.
Diversification Opportunities for Merck and Canfor Pulp
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Canfor is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Canfor Pulp Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor Pulp Products 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 Canfor Pulp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor Pulp Products has no effect on the direction of Merck i.e., Merck and Canfor Pulp go up and down completely randomly.
Pair Corralation between Merck and Canfor Pulp
Considering the 90-day investment horizon Merck Company is expected to generate 0.51 times more return on investment than Canfor Pulp. However, Merck Company is 1.98 times less risky than Canfor Pulp. It trades about -0.08 of its potential returns per unit of risk. Canfor Pulp Products is currently generating about -0.23 per unit of risk. If you would invest 10,423 in Merck Company on August 29, 2024 and sell it today you would lose (261.00) from holding Merck Company or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Canfor Pulp Products
Performance |
| Timeline |
| Merck Company |
| Canfor Pulp Products |
Merck and Canfor Pulp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Canfor Pulp
The main advantage of trading using opposite Merck and Canfor Pulp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Canfor Pulp 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 Canfor Pulp will offset losses from the drop in Canfor Pulp's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Canfor Pulp vs. Nine Dragons Paper | Canfor Pulp vs. Nine Dragons Paper | Canfor Pulp vs. Mondi PLC ADR | Canfor Pulp vs. Klabin Sa A |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |