Correlation Between Vulcan Materials and Merck
Can any of the company-specific risk be diversified away by investing in both Vulcan Materials 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 Vulcan Materials and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vulcan Materials and Merck Company, you can compare the effects of market volatilities on Vulcan Materials 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 Vulcan Materials with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and Merck.
Diversification Opportunities for Vulcan Materials and Merck
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vulcan and Merck is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and Merck go up and down completely randomly.
Pair Corralation between Vulcan Materials and Merck
Assuming the 90 days horizon Vulcan Materials is expected to under-perform the Merck. In addition to that, Vulcan Materials is 1.18 times more volatile than Merck Company. It trades about -0.34 of its total potential returns per unit of risk. Merck Company is currently generating about 0.02 per unit of volatility. If you would invest 14,265 in Merck Company on October 13, 2024 and sell it today you would earn a total of 40.00 from holding Merck Company or generate 0.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vulcan Materials vs. Merck Company
Performance |
Timeline |
Vulcan Materials |
Merck Company |
Vulcan Materials and Merck Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vulcan Materials and Merck
The main advantage of trading using opposite Vulcan Materials and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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.Vulcan Materials vs. CAREER EDUCATION | Vulcan Materials vs. Marie Brizard Wine | Vulcan Materials vs. EMBARK EDUCATION LTD | Vulcan Materials vs. WILLIS LEASE FIN |
Merck vs. SANOK RUBBER ZY | Merck vs. Martin Marietta Materials | Merck vs. MAGNUM MINING EXP | Merck vs. Vulcan Materials |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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