Correlation Between Merck and Galane Gold
Can any of the company-specific risk be diversified away by investing in both Merck and Galane Gold 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 Galane Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Galane Gold, you can compare the effects of market volatilities on Merck and Galane Gold 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 Galane Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Galane Gold.
Diversification Opportunities for Merck and Galane Gold
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Galane is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Galane Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galane Gold 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 Galane Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galane Gold has no effect on the direction of Merck i.e., Merck and Galane Gold go up and down completely randomly.
Pair Corralation between Merck and Galane Gold
Considering the 90-day investment horizon Merck Company is expected to under-perform the Galane Gold. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 4.41 times less risky than Galane Gold. The stock trades about -0.02 of its potential returns per unit of risk. The Galane Gold is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Galane Gold on September 1, 2024 and sell it today you would earn a total of 2.00 from holding Galane Gold or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Galane Gold
Performance |
| Timeline |
| Merck Company |
| Galane Gold |
Merck and Galane Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Galane Gold
The main advantage of trading using opposite Merck and Galane Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Galane Gold 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 Galane Gold will offset losses from the drop in Galane Gold's long position.The idea behind Merck Company and Galane Gold 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.| Galane Gold vs. South32 Limited | Galane Gold vs. NioCorp Developments Ltd | Galane Gold vs. HUMANA INC | Galane Gold vs. SCOR PK |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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