Correlation Between Merck and EQUINOR
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By analyzing existing cross correlation between Merck Company and EQUINOR ASA, you can compare the effects of market volatilities on Merck and EQUINOR 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 EQUINOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and EQUINOR.
Diversification Opportunities for Merck and EQUINOR
Poor diversification
The 3 months correlation between Merck and EQUINOR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and EQUINOR ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUINOR ASA 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 EQUINOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUINOR ASA has no effect on the direction of Merck i.e., Merck and EQUINOR go up and down completely randomly.
Pair Corralation between Merck and EQUINOR
Considering the 90-day investment horizon Merck Company is expected to under-perform the EQUINOR. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.09 times less risky than EQUINOR. The stock trades about -0.16 of its potential returns per unit of risk. The EQUINOR ASA is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 7,925 in EQUINOR ASA on September 2, 2024 and sell it today you would lose (475.00) from holding EQUINOR ASA or give up 5.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.25% |
| Values | Daily Returns |
Merck Company vs. EQUINOR ASA
Performance |
| Timeline |
| Merck Company |
| EQUINOR ASA |
Merck and EQUINOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and EQUINOR
The main advantage of trading using opposite Merck and EQUINOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, EQUINOR 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 EQUINOR will offset losses from the drop in EQUINOR's long position.The idea behind Merck Company and EQUINOR ASA 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.| EQUINOR vs. Cleantech Power Corp | EQUINOR vs. Under Armour C | EQUINOR vs. Logan Ridge Finance | EQUINOR vs. Verde Clean Fuels |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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