Correlation Between Merck and Search Minerals
Can any of the company-specific risk be diversified away by investing in both Merck and Search 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 Search 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 Search Minerals, you can compare the effects of market volatilities on Merck and Search 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 Search Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Search Minerals.
Diversification Opportunities for Merck and Search Minerals
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Search is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Search Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Search Minerals 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 Search Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Search Minerals has no effect on the direction of Merck i.e., Merck and Search Minerals go up and down completely randomly.
Pair Corralation between Merck and Search Minerals
Considering the 90-day investment horizon Merck is expected to generate 1142.27 times less return on investment than Search Minerals. But when comparing it to its historical volatility, Merck Company is 40.91 times less risky than Search Minerals. It trades about 0.0 of its potential returns per unit of risk. Search Minerals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5.10 in Search Minerals on August 29, 2024 and sell it today you would lose (3.90) from holding Search Minerals or give up 76.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Search Minerals
Performance |
| Timeline |
| Merck Company |
| Search Minerals |
Merck and Search Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Search Minerals
The main advantage of trading using opposite Merck and Search Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Search 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 Search Minerals will offset losses from the drop in Search Minerals' long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Search Minerals vs. Silver Hammer Mining | Search Minerals vs. Reyna Silver Corp | Search Minerals vs. Guanajuato Silver | Search Minerals vs. Silver One Resources |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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