Correlation Between Rimrock Gold and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Rimrock Gold and Merck KGaA 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 Rimrock Gold and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rimrock Gold Corp and Merck KGaA ADR, you can compare the effects of market volatilities on Rimrock Gold and Merck KGaA 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 Rimrock Gold with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rimrock Gold and Merck KGaA.
Diversification Opportunities for Rimrock Gold and Merck KGaA
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Rimrock and Merck is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rimrock Gold Corp and Merck KGaA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA ADR and Rimrock Gold 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 Rimrock Gold Corp are associated (or correlated) with Merck KGaA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck KGaA ADR has no effect on the direction of Rimrock Gold i.e., Rimrock Gold and Merck KGaA go up and down completely randomly.
Pair Corralation between Rimrock Gold and Merck KGaA
Given the investment horizon of 90 days Rimrock Gold Corp is expected to generate 8.73 times more return on investment than Merck KGaA. However, Rimrock Gold is 8.73 times more volatile than Merck KGaA ADR. It trades about 0.06 of its potential returns per unit of risk. Merck KGaA ADR is currently generating about -0.34 per unit of risk. If you would invest 0.03 in Rimrock Gold Corp on September 2, 2024 and sell it today you would earn a total of 0.00 from holding Rimrock Gold Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rimrock Gold Corp vs. Merck KGaA ADR
Performance |
| Timeline |
| Rimrock Gold Corp |
| Merck KGaA ADR |
Rimrock Gold and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rimrock Gold and Merck KGaA
The main advantage of trading using opposite Rimrock Gold and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rimrock Gold position performs unexpectedly, Merck KGaA 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 Merck KGaA will offset losses from the drop in Merck KGaA's long position.| Rimrock Gold vs. Green Cures Botanical | Rimrock Gold vs. Cann American Corp | Rimrock Gold vs. Galexxy Holdings | Rimrock Gold vs. Indoor Harvest Corp |
| Merck KGaA vs. Holloman Energy Corp | Merck KGaA vs. cbdMD Inc | Merck KGaA vs. Evolus Inc | Merck KGaA vs. CV Sciences |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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