Correlation Between Merck and Exploits Discovery
Can any of the company-specific risk be diversified away by investing in both Merck and Exploits Discovery 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 Exploits Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Exploits Discovery Corp, you can compare the effects of market volatilities on Merck and Exploits Discovery 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 Exploits Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Exploits Discovery.
Diversification Opportunities for Merck and Exploits Discovery
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Exploits is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Exploits Discovery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exploits Discovery 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 Exploits Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exploits Discovery Corp has no effect on the direction of Merck i.e., Merck and Exploits Discovery go up and down completely randomly.
Pair Corralation between Merck and Exploits Discovery
Considering the 90-day investment horizon Merck Company is expected to generate 0.21 times more return on investment than Exploits Discovery. However, Merck Company is 4.8 times less risky than Exploits Discovery. It trades about 0.01 of its potential returns per unit of risk. Exploits Discovery Corp is currently generating about -0.01 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Exploits Discovery Corp
Performance |
| Timeline |
| Merck Company |
| Exploits Discovery Corp |
Merck and Exploits Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Exploits Discovery
The main advantage of trading using opposite Merck and Exploits Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Exploits Discovery 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 Exploits Discovery will offset losses from the drop in Exploits Discovery's long position.The idea behind Merck Company and Exploits Discovery 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.| Exploits Discovery vs. Labrador Gold Corp | Exploits Discovery vs. Banyan Gold Corp | Exploits Discovery vs. Mako Mining Corp | Exploits Discovery vs. Puma Exploration |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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