Correlation Between Merck and Teucrium Wheat
Can any of the company-specific risk be diversified away by investing in both Merck and Teucrium Wheat 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 Teucrium Wheat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Teucrium Wheat, you can compare the effects of market volatilities on Merck and Teucrium Wheat 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 Teucrium Wheat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Teucrium Wheat.
Diversification Opportunities for Merck and Teucrium Wheat
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Teucrium is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Teucrium Wheat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Wheat 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 Teucrium Wheat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Wheat has no effect on the direction of Merck i.e., Merck and Teucrium Wheat go up and down completely randomly.
Pair Corralation between Merck and Teucrium Wheat
Considering the 90-day investment horizon Merck Company is expected to under-perform the Teucrium Wheat. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.07 times less risky than Teucrium Wheat. The stock trades about -0.07 of its potential returns per unit of risk. The Teucrium Wheat is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 473.00 in Teucrium Wheat on October 24, 2024 and sell it today you would earn a total of 2.00 from holding Teucrium Wheat or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Teucrium Wheat
Performance |
| Timeline |
| Merck Company |
| Teucrium Wheat |
Merck and Teucrium Wheat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Teucrium Wheat
The main advantage of trading using opposite Merck and Teucrium Wheat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Teucrium Wheat 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 Teucrium Wheat will offset losses from the drop in Teucrium Wheat's long position.| Merck vs. DiaMedica Therapeutics | Merck vs. Seres Therapeutics | Merck vs. Inhibikase Therapeutics | Merck vs. Oncolytics Biotech |
| Teucrium Wheat vs. Teucrium Corn | Teucrium Wheat vs. Teucrium Soybean | Teucrium Wheat vs. Teucrium Sugar | Teucrium Wheat vs. Invesco DB Agriculture |
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 CEOs Directory module to screen CEOs from public companies around the world.
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