Correlation Between Merck and Interra Copper
Can any of the company-specific risk be diversified away by investing in both Merck and Interra Copper 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 Interra Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Interra Copper Corp, you can compare the effects of market volatilities on Merck and Interra Copper 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 Interra Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Interra Copper.
Diversification Opportunities for Merck and Interra Copper
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Merck and Interra is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Interra Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interra Copper Corp 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 Interra Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interra Copper Corp has no effect on the direction of Merck i.e., Merck and Interra Copper go up and down completely randomly.
Pair Corralation between Merck and Interra Copper
Considering the 90-day investment horizon Merck Company is expected to under-perform the Interra Copper. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 11.87 times less risky than Interra Copper. The stock trades about -0.05 of its potential returns per unit of risk. The Interra Copper Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 8.39 in Interra Copper Corp on August 31, 2024 and sell it today you would lose (1.81) from holding Interra Copper Corp or give up 21.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Interra Copper Corp
Performance |
| Timeline |
| Merck Company |
| Interra Copper Corp |
Merck and Interra Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Interra Copper
The main advantage of trading using opposite Merck and Interra Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Interra Copper 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 Interra Copper will offset losses from the drop in Interra Copper's long position.The idea behind Merck Company and Interra Copper Corp 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.| Interra Copper vs. Liontown Resources Limited | Interra Copper vs. ATT Inc | Interra Copper vs. Merck Company | Interra Copper 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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