Correlation Between Merck and Commander Resources
Can any of the company-specific risk be diversified away by investing in both Merck and Commander Resources 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 Commander Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Commander Resources, you can compare the effects of market volatilities on Merck and Commander Resources 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 Commander Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Commander Resources.
Diversification Opportunities for Merck and Commander Resources
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and Commander is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander 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 Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of Merck i.e., Merck and Commander Resources go up and down completely randomly.
Pair Corralation between Merck and Commander Resources
Considering the 90-day investment horizon Merck Company is expected to under-perform the Commander Resources. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 6.8 times less risky than Commander Resources. The stock trades about 0.0 of its potential returns per unit of risk. The Commander Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Commander Resources on September 3, 2024 and sell it today you would lose (2.00) from holding Commander Resources or give up 28.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Merck Company vs. Commander Resources
Performance |
| Timeline |
| Merck Company |
| Commander Resources |
Merck and Commander Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Commander Resources
The main advantage of trading using opposite Merck and Commander Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Commander Resources 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 Commander Resources will offset losses from the drop in Commander Resources' long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Commander Resources vs. Themac Resources Group | Commander Resources vs. East Africa Metals | Commander Resources vs. Forsys Metals Corp | Commander Resources vs. American CuMo Mining |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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