Correlation Between Merck and Traction Uranium
Can any of the company-specific risk be diversified away by investing in both Merck and Traction Uranium 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 Traction Uranium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Traction Uranium Corp, you can compare the effects of market volatilities on Merck and Traction Uranium 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 Traction Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Traction Uranium.
Diversification Opportunities for Merck and Traction Uranium
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and Traction is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Traction Uranium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traction Uranium Corp 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 Traction Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traction Uranium Corp has no effect on the direction of Merck i.e., Merck and Traction Uranium go up and down completely randomly.
Pair Corralation between Merck and Traction Uranium
Considering the 90-day investment horizon Merck is expected to generate 359.72 times less return on investment than Traction Uranium. But when comparing it to its historical volatility, Merck Company is 36.5 times less risky than Traction Uranium. It trades about 0.0 of its potential returns per unit of risk. Traction Uranium Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 214.00 in Traction Uranium Corp on September 1, 2024 and sell it today you would lose (193.00) from holding Traction Uranium Corp or give up 90.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Merck Company vs. Traction Uranium Corp
Performance |
| Timeline |
| Merck Company |
| Traction Uranium Corp |
Merck and Traction Uranium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Traction Uranium
The main advantage of trading using opposite Merck and Traction Uranium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Traction Uranium 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 Traction Uranium will offset losses from the drop in Traction Uranium's long position.The idea behind Merck Company and Traction Uranium 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.| Traction Uranium vs. ATT Inc | Traction Uranium vs. Merck Company | Traction Uranium vs. Walt Disney | Traction Uranium vs. Caterpillar |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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