Correlation Between Merck and CITIC Resources
Can any of the company-specific risk be diversified away by investing in both Merck and CITIC 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 CITIC 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 CITIC Resources Holdings, you can compare the effects of market volatilities on Merck and CITIC 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 CITIC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CITIC Resources.
Diversification Opportunities for Merck and CITIC Resources
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and CITIC is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CITIC Resources Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Resources Holdings 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 CITIC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Resources Holdings has no effect on the direction of Merck i.e., Merck and CITIC Resources go up and down completely randomly.
Pair Corralation between Merck and CITIC Resources
If you would invest 8.00 in CITIC Resources Holdings on September 2, 2024 and sell it today you would earn a total of 0.00 from holding CITIC Resources Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Merck Company vs. CITIC Resources Holdings
Performance |
| Timeline |
| Merck Company |
| CITIC Resources Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and CITIC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and CITIC Resources
The main advantage of trading using opposite Merck and CITIC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, CITIC 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 CITIC Resources will offset losses from the drop in CITIC Resources' long position.The idea behind Merck Company and CITIC Resources Holdings 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.| CITIC Resources vs. Sherritt International | CITIC Resources vs. Metals X Limited | CITIC Resources vs. Interra Copper Corp | CITIC Resources vs. Anglo American PLC |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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