Correlation Between Merck and Parex Resources
Can any of the company-specific risk be diversified away by investing in both Merck and Parex Resources 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 Parex Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Parex Resources, you can compare the effects of market volatilities on Merck and Parex Resources 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 Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Parex Resources.
Diversification Opportunities for Merck and Parex Resources
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Parex is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources 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 Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of Merck i.e., Merck and Parex Resources go up and down completely randomly.
Pair Corralation between Merck and Parex Resources
Considering the 90-day investment horizon Merck Company is expected to under-perform the Parex Resources. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.92 times less risky than Parex Resources. The stock trades about -0.15 of its potential returns per unit of risk. The Parex Resources is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 927.00 in Parex Resources on October 23, 2024 and sell it today you would earn a total of 83.00 from holding Parex Resources or generate 8.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Merck Company vs. Parex Resources
Performance |
| Timeline |
| Merck Company |
| Parex Resources |
Merck and Parex Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Parex Resources
The main advantage of trading using opposite Merck and Parex Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Parex Resources 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 Parex Resources will offset losses from the drop in Parex Resources' long position.| Merck vs. DiaMedica Therapeutics | Merck vs. Seres Therapeutics | Merck vs. Inhibikase Therapeutics | Merck vs. Oncolytics Biotech |
| Parex Resources vs. Petro Viking Energy | Parex Resources vs. Surge Energy | Parex Resources vs. Razor Energy Corp | Parex Resources vs. Prospera Energy |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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