Correlation Between Merck and Pardee Resources
Can any of the company-specific risk be diversified away by investing in both Merck and Pardee 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 Pardee 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 Pardee Resources Co, you can compare the effects of market volatilities on Merck and Pardee 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 Pardee Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Pardee Resources.
Diversification Opportunities for Merck and Pardee Resources
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Pardee is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Pardee Resources Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pardee 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 Pardee Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pardee Resources has no effect on the direction of Merck i.e., Merck and Pardee Resources go up and down completely randomly.
Pair Corralation between Merck and Pardee Resources
Considering the 90-day investment horizon Merck is expected to generate 12.26 times less return on investment than Pardee Resources. But when comparing it to its historical volatility, Merck Company is 1.82 times less risky than Pardee Resources. It trades about 0.01 of its potential returns per unit of risk. Pardee Resources Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 24,258 in Pardee Resources Co on September 1, 2024 and sell it today you would earn a total of 7,242 from holding Pardee Resources Co or generate 29.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 88.79% |
| Values | Daily Returns |
Merck Company vs. Pardee Resources Co
Performance |
| Timeline |
| Merck Company |
| Pardee Resources |
Merck and Pardee Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Pardee Resources
The main advantage of trading using opposite Merck and Pardee Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Pardee 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 Pardee Resources will offset losses from the drop in Pardee Resources' long position.The idea behind Merck Company and Pardee Resources Co 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.| Pardee Resources vs. Expro Group Holdings | Pardee Resources vs. ChampionX | Pardee Resources vs. Ranger Energy Services | Pardee Resources vs. Cactus Inc |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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