Correlation Between Merck and Sprott Physical
Can any of the company-specific risk be diversified away by investing in both Merck and Sprott Physical 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 Sprott Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Sprott Physical Silver, you can compare the effects of market volatilities on Merck and Sprott Physical 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 Sprott Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Sprott Physical.
Diversification Opportunities for Merck and Sprott Physical
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Sprott is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Sprott Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Silver 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Silver has no effect on the direction of Merck i.e., Merck and Sprott Physical go up and down completely randomly.
Pair Corralation between Merck and Sprott Physical
Considering the 90-day investment horizon Merck Company is expected to under-perform the Sprott Physical. In addition to that, Merck is 2.2 times more volatile than Sprott Physical Silver. It trades about -0.13 of its total potential returns per unit of risk. Sprott Physical Silver is currently generating about 0.36 per unit of volatility. If you would invest 1,013 in Sprott Physical Silver on November 27, 2024 and sell it today you would earn a total of 84.00 from holding Sprott Physical Silver or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Sprott Physical Silver
Performance |
| Timeline |
| Merck Company |
| Sprott Physical Silver |
Merck and Sprott Physical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Sprott Physical
The main advantage of trading using opposite Merck and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Sprott Physical 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 Sprott Physical will offset losses from the drop in Sprott Physical's long position.The idea behind Merck Company and Sprott Physical Silver 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.| Sprott Physical vs. Sprott Physical Gold | Sprott Physical vs. Sprott Physical Platinum | Sprott Physical vs. Blue Owl Capital | Sprott Physical vs. Ares Management LP |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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