Correlation Between Merck and Minerals Technologies
Can any of the company-specific risk be diversified away by investing in both Merck and Minerals Technologies 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 Minerals Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Minerals Technologies, you can compare the effects of market volatilities on Merck and Minerals Technologies 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 Minerals Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Minerals Technologies.
Diversification Opportunities for Merck and Minerals Technologies
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Minerals is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Merck i.e., Merck and Minerals Technologies go up and down completely randomly.
Pair Corralation between Merck and Minerals Technologies
Considering the 90-day investment horizon Merck Company is expected to under-perform the Minerals Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.36 times less risky than Minerals Technologies. The stock trades about 0.0 of its potential returns per unit of risk. The Minerals Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,547 in Minerals Technologies on September 12, 2024 and sell it today you would earn a total of 2,391 from holding Minerals Technologies or generate 43.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Minerals Technologies
Performance |
| Timeline |
| Merck Company |
| Minerals Technologies |
Merck and Minerals Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Minerals Technologies
The main advantage of trading using opposite Merck and Minerals Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Minerals Technologies 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 Minerals Technologies will offset losses from the drop in Minerals Technologies' long position.| Merck vs. Victory Integrity Smallmid Cap | Merck vs. Hilton Worldwide Holdings | Merck vs. NVIDIA | Merck vs. JPMorgan Chase Co |
| Minerals Technologies vs. Griffon | Minerals Technologies vs. Merck Company | Minerals Technologies vs. Brinker International | Minerals Technologies vs. Alcoa Corp |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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