Correlation Between Merck and StrikePoint Gold
Can any of the company-specific risk be diversified away by investing in both Merck and StrikePoint Gold 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 StrikePoint Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and StrikePoint Gold, you can compare the effects of market volatilities on Merck and StrikePoint Gold 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 StrikePoint Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and StrikePoint Gold.
Diversification Opportunities for Merck and StrikePoint Gold
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and StrikePoint is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and StrikePoint Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StrikePoint Gold 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 StrikePoint Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StrikePoint Gold has no effect on the direction of Merck i.e., Merck and StrikePoint Gold go up and down completely randomly.
Pair Corralation between Merck and StrikePoint Gold
Considering the 90-day investment horizon Merck Company is expected to under-perform the StrikePoint Gold. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 132.75 times less risky than StrikePoint Gold. The stock trades about -0.11 of its potential returns per unit of risk. The StrikePoint Gold is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 57.00 in StrikePoint Gold on August 31, 2024 and sell it today you would lose (42.00) from holding StrikePoint Gold or give up 73.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. StrikePoint Gold
Performance |
| Timeline |
| Merck Company |
| StrikePoint Gold |
Merck and StrikePoint Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and StrikePoint Gold
The main advantage of trading using opposite Merck and StrikePoint Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, StrikePoint Gold 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 StrikePoint Gold will offset losses from the drop in StrikePoint Gold's long position.The idea behind Merck Company and StrikePoint Gold 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.| StrikePoint Gold vs. Liontown Resources Limited | StrikePoint Gold vs. ATT Inc | StrikePoint Gold vs. Merck Company | StrikePoint Gold vs. Walt Disney |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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