Correlation Between Merck and Tree Island
Can any of the company-specific risk be diversified away by investing in both Merck and Tree Island 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 Tree Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Tree Island Steel, you can compare the effects of market volatilities on Merck and Tree Island 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 Tree Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Tree Island.
Diversification Opportunities for Merck and Tree Island
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Tree is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Tree Island Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree Island Steel 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 Tree Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree Island Steel has no effect on the direction of Merck i.e., Merck and Tree Island go up and down completely randomly.
Pair Corralation between Merck and Tree Island
Considering the 90-day investment horizon Merck Company is expected to under-perform the Tree Island. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.93 times less risky than Tree Island. The stock trades about 0.0 of its potential returns per unit of risk. The Tree Island Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 255.00 in Tree Island Steel on August 27, 2024 and sell it today you would lose (50.00) from holding Tree Island Steel or give up 19.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 68.75% |
| Values | Daily Returns |
Merck Company vs. Tree Island Steel
Performance |
| Timeline |
| Merck Company |
| Tree Island Steel |
Merck and Tree Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Tree Island
The main advantage of trading using opposite Merck and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Tree Island 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 Tree Island will offset losses from the drop in Tree Island's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Tree Island vs. Ascendant Resources | Tree Island vs. Cantex Mine Development | Tree Island vs. Amarc Resources | Tree Island vs. Sterling Metals Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |