Correlation Between Merck and Nova Minerals
Can any of the company-specific risk be diversified away by investing in both Merck and Nova Minerals 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 Nova Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Nova Minerals Limited, you can compare the effects of market volatilities on Merck and Nova Minerals 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 Nova Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Nova Minerals.
Diversification Opportunities for Merck and Nova Minerals
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and Nova is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited 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 Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of Merck i.e., Merck and Nova Minerals go up and down completely randomly.
Pair Corralation between Merck and Nova Minerals
Considering the 90-day investment horizon Merck is expected to generate 4923.4 times less return on investment than Nova Minerals. But when comparing it to its historical volatility, Merck Company is 44.23 times less risky than Nova Minerals. It trades about 0.0 of its potential returns per unit of risk. Nova Minerals Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Nova Minerals Limited on September 3, 2024 and sell it today you would lose (33.00) from holding Nova Minerals Limited or give up 75.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Nova Minerals Limited
Performance |
| Timeline |
| Merck Company |
| Nova Minerals Limited |
Merck and Nova Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Nova Minerals
The main advantage of trading using opposite Merck and Nova Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Nova Minerals 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 Nova Minerals will offset losses from the drop in Nova Minerals' long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Nova Minerals vs. Qubec Nickel Corp | Nova Minerals vs. IGO Limited | Nova Minerals vs. Avarone Metals | Nova Minerals vs. Adriatic Metals PLC |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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