Correlation Between Merck and Labrador Gold
Can any of the company-specific risk be diversified away by investing in both Merck and Labrador Gold 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 Labrador Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Labrador Gold Corp, you can compare the effects of market volatilities on Merck and Labrador Gold 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 Labrador Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Labrador Gold.
Diversification Opportunities for Merck and Labrador Gold
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Labrador is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Labrador Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Gold 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 Labrador Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Gold Corp has no effect on the direction of Merck i.e., Merck and Labrador Gold go up and down completely randomly.
Pair Corralation between Merck and Labrador Gold
Considering the 90-day investment horizon Merck Company is expected to generate 0.23 times more return on investment than Labrador Gold. However, Merck Company is 4.28 times less risky than Labrador Gold. It trades about -0.03 of its potential returns per unit of risk. Labrador Gold Corp is currently generating about -0.24 per unit of risk. If you would invest 10,423 in Merck Company on August 29, 2024 and sell it today you would lose (112.50) from holding Merck Company or give up 1.08% 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. Labrador Gold Corp
Performance |
| Timeline |
| Merck Company |
| Labrador Gold Corp |
Merck and Labrador Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Labrador Gold
The main advantage of trading using opposite Merck and Labrador Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Labrador Gold 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 Labrador Gold will offset losses from the drop in Labrador Gold's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Labrador Gold vs. Exploits Discovery Corp | Labrador Gold vs. Mako Mining Corp | Labrador Gold vs. Puma Exploration | Labrador Gold vs. Aurion 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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