Correlation Between Merck and Knife River
Can any of the company-specific risk be diversified away by investing in both Merck and Knife River 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 Knife River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Knife River, you can compare the effects of market volatilities on Merck and Knife River 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 Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Knife River.
Diversification Opportunities for Merck and Knife River
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Knife is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River 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 Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Merck i.e., Merck and Knife River go up and down completely randomly.
Pair Corralation between Merck and Knife River
Considering the 90-day investment horizon Merck Company is expected to under-perform the Knife River. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.61 times less risky than Knife River. The stock trades about -0.17 of its potential returns per unit of risk. The Knife River is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 9,345 in Knife River on August 26, 2024 and sell it today you would earn a total of 920.00 from holding Knife River or generate 9.84% 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. Knife River
Performance |
| Timeline |
| Merck Company |
| Knife River |
Merck and Knife River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Knife River
The main advantage of trading using opposite Merck and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Knife River 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 Knife River will offset losses from the drop in Knife River's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Knife River vs. Cemex SAB de | Knife River vs. Boise Cascad Llc | Knife River vs. CRH PLC ADR | Knife River vs. Eagle Materials |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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