Correlation Between Merck and Tarku Resources
Can any of the company-specific risk be diversified away by investing in both Merck and Tarku Resources 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 Tarku Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Tarku Resources, you can compare the effects of market volatilities on Merck and Tarku Resources 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 Tarku Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Tarku Resources.
Diversification Opportunities for Merck and Tarku Resources
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Tarku is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Tarku Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarku Resources 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 Tarku Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarku Resources has no effect on the direction of Merck i.e., Merck and Tarku Resources go up and down completely randomly.
Pair Corralation between Merck and Tarku Resources
Considering the 90-day investment horizon Merck Company is expected to under-perform the Tarku Resources. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 17.82 times less risky than Tarku Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Tarku Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.74 in Tarku Resources on September 1, 2024 and sell it today you would lose (0.20) from holding Tarku Resources or give up 27.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Tarku Resources
Performance |
| Timeline |
| Merck Company |
| Tarku Resources |
Merck and Tarku Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Tarku Resources
The main advantage of trading using opposite Merck and Tarku Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Tarku Resources 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 Tarku Resources will offset losses from the drop in Tarku Resources' long position.The idea behind Merck Company and Tarku Resources 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.| Tarku Resources vs. ATT Inc | Tarku Resources vs. Merck Company | Tarku Resources vs. Walt Disney | Tarku Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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