Correlation Between Endeavour Mining and Merck

Can any of the company-specific risk be diversified away by investing in both Endeavour Mining 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 Endeavour Mining and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Endeavour Mining PLC and Merck Co, you can compare the effects of market volatilities on Endeavour Mining 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 Endeavour Mining with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endeavour Mining and Merck.

Diversification Opportunities for Endeavour Mining and Merck

0.44

Correlation Coefficient

Endeavour Mining  Merck

Very weak diversification

The 3 months correlation between Endeavour and Merck is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Endeavour Mining PLC and Merck Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck and Endeavour Mining 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 Endeavour Mining PLC 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 has no effect on the direction of Endeavour Mining i.e., Endeavour Mining and Merck go up and down completely randomly.

Pair Corralation between Endeavour Mining and Merck

Assuming the 90 days trading horizon Endeavour Mining PLC is expected to under-perform the Merck. In addition to that, Endeavour Mining is 1.86 times more volatile than Merck Co. It trades about -0.05 of its total potential returns per unit of risk. Merck Co is currently generating about -0.04 per unit of volatility. If you would invest  9,867  in Merck Co on October 9, 2024 and sell it today you would lose (337.00) from holding Merck Co or give up 3.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Endeavour Mining PLC  vs.  Merck Co

Endeavour Mining PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Endeavour Mining PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Merck

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Merck is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Endeavour Mining and Merck

The main advantage of trading using opposite Endeavour Mining and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endeavour Mining 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.

The idea behind Endeavour Mining PLC and Merck Co 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.