Correlation Between Merck and Jaguar Mining
Can any of the company-specific risk be diversified away by investing in both Merck and Jaguar Mining 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 Jaguar Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Jaguar Mining, you can compare the effects of market volatilities on Merck and Jaguar Mining 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 Jaguar Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Jaguar Mining.
Diversification Opportunities for Merck and Jaguar Mining
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Jaguar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Jaguar Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jaguar Mining 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 Jaguar Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jaguar Mining has no effect on the direction of Merck i.e., Merck and Jaguar Mining go up and down completely randomly.
Pair Corralation between Merck and Jaguar Mining
Considering the 90-day investment horizon Merck Company is expected to generate 0.35 times more return on investment than Jaguar Mining. However, Merck Company is 2.89 times less risky than Jaguar Mining. It trades about -0.02 of its potential returns per unit of risk. Jaguar Mining is currently generating about -0.21 per unit of risk. If you would invest 10,232 in Merck Company on September 1, 2024 and sell it today you would lose (68.00) from holding Merck Company or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Jaguar Mining
Performance |
| Timeline |
| Merck Company |
| Jaguar Mining |
Merck and Jaguar Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Jaguar Mining
The main advantage of trading using opposite Merck and Jaguar Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Jaguar Mining 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 Jaguar Mining will offset losses from the drop in Jaguar Mining's long position.The idea behind Merck Company and Jaguar Mining 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.| Jaguar Mining vs. South32 Limited | Jaguar Mining vs. NioCorp Developments Ltd | Jaguar Mining vs. HUMANA INC | Jaguar Mining 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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