Correlation Between Merck and Peyto ExplorationDevel
Can any of the company-specific risk be diversified away by investing in both Merck and Peyto ExplorationDevel 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 Peyto ExplorationDevel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Peyto ExplorationDevelopment Corp, you can compare the effects of market volatilities on Merck and Peyto ExplorationDevel 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 Peyto ExplorationDevel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Peyto ExplorationDevel.
Diversification Opportunities for Merck and Peyto ExplorationDevel
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Peyto is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Peyto ExplorationDevelopment C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peyto ExplorationDevel 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 Peyto ExplorationDevel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peyto ExplorationDevel has no effect on the direction of Merck i.e., Merck and Peyto ExplorationDevel go up and down completely randomly.
Pair Corralation between Merck and Peyto ExplorationDevel
Considering the 90-day investment horizon Merck Company is expected to under-perform the Peyto ExplorationDevel. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.2 times less risky than Peyto ExplorationDevel. The stock trades about -0.06 of its potential returns per unit of risk. The Peyto ExplorationDevelopment Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,020 in Peyto ExplorationDevelopment Corp on September 1, 2024 and sell it today you would earn a total of 165.00 from holding Peyto ExplorationDevelopment Corp or generate 16.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Peyto ExplorationDevelopment C
Performance |
| Timeline |
| Merck Company |
| Peyto ExplorationDevel |
Merck and Peyto ExplorationDevel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Peyto ExplorationDevel
The main advantage of trading using opposite Merck and Peyto ExplorationDevel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Peyto ExplorationDevel 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 Peyto ExplorationDevel will offset losses from the drop in Peyto ExplorationDevel's long position.The idea behind Merck Company and Peyto ExplorationDevelopment 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.| Peyto ExplorationDevel vs. Birchcliff Energy | Peyto ExplorationDevel vs. Tamarack Valley Energy | Peyto ExplorationDevel vs. Gear Energy | Peyto ExplorationDevel vs. Spartan Delta Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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