Correlation Between Merck and Nevada Copper
Can any of the company-specific risk be diversified away by investing in both Merck and Nevada 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 Nevada 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 Nevada Copper Corp, you can compare the effects of market volatilities on Merck and Nevada 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 Nevada Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Nevada Copper.
Diversification Opportunities for Merck and Nevada Copper
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Nevada is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Nevada Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevada 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 Nevada Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevada Copper Corp has no effect on the direction of Merck i.e., Merck and Nevada Copper go up and down completely randomly.
Pair Corralation between Merck and Nevada Copper
Considering the 90-day investment horizon Merck Company is expected to generate 0.15 times more return on investment than Nevada Copper. However, Merck Company is 6.64 times less risky than Nevada Copper. It trades about 0.01 of its potential returns per unit of risk. Nevada Copper Corp is currently generating about -0.05 per unit of risk. If you would invest 10,164 in Merck Company on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Merck Company or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 71.38% |
| Values | Daily Returns |
Merck Company vs. Nevada Copper Corp
Performance |
| Timeline |
| Merck Company |
| Nevada Copper Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Nevada Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Nevada Copper
The main advantage of trading using opposite Merck and Nevada Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Nevada 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 Nevada Copper will offset losses from the drop in Nevada Copper's long position.The idea behind Merck Company and Nevada 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.| Nevada Copper vs. Ero Copper Corp | Nevada Copper vs. Copperbank Resources Corp | Nevada Copper vs. Copper Mountain Mining | Nevada Copper vs. CopperCorp Resources |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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