Correlation Between Transportadora and Merck
Can any of the company-specific risk be diversified away by investing in both Transportadora and Merck 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 Transportadora and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transportadora de Gas and Merck Company, you can compare the effects of market volatilities on Transportadora and Merck 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 Transportadora with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and Merck.
Diversification Opportunities for Transportadora and Merck
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Transportadora and Merck is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Transportadora 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 Transportadora de Gas are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Transportadora i.e., Transportadora and Merck go up and down completely randomly.
Pair Corralation between Transportadora and Merck
Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 1.58 times more return on investment than Merck. However, Transportadora is 1.58 times more volatile than Merck Company. It trades about 0.14 of its potential returns per unit of risk. Merck Company is currently generating about 0.1 per unit of risk. If you would invest 62,650 in Transportadora de Gas on September 2, 2024 and sell it today you would earn a total of 597,350 from holding Transportadora de Gas or generate 953.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transportadora de Gas vs. Merck Company
Performance |
| Timeline |
| Transportadora de Gas |
| Merck Company |
Transportadora and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transportadora and Merck
The main advantage of trading using opposite Transportadora and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora position performs unexpectedly, Merck 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 will offset losses from the drop in Merck's long position.| Transportadora vs. Harmony Gold Mining | Transportadora vs. Telecom Argentina | Transportadora vs. Agrometal SAI | Transportadora vs. United States Steel |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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