Correlation Between MAGNUM MINING and Merck

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

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

Diversification Opportunities for MAGNUM MINING and Merck

0.68

Correlation Coefficient

MAGNUM MINING  Merck

Poor diversification

The 3 months correlation between MAGNUM and Merck is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MAGNUM MINING EXP and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and MAGNUM 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 MAGNUM MINING EXP 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 MAGNUM MINING i.e., MAGNUM MINING and Merck go up and down completely randomly.

Pair Corralation between MAGNUM MINING and Merck

Assuming the 90 days trading horizon MAGNUM MINING EXP is expected to under-perform the Merck. In addition to that, MAGNUM MINING is 2.17 times more volatile than Merck Company. It trades about -0.13 of its total potential returns per unit of risk. Merck Company is currently generating about 0.01 per unit of volatility. If you would invest  13,680  in Merck Company on December 20, 2024 and sell it today you would lose (30.00) from holding Merck Company or give up 0.22% of portfolio value over 90 days.

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

MAGNUM MINING EXP  vs.  Merck Company

MAGNUM MINING EXP

Risk-Adjusted Performance

Very Weak

Over the last 90 days MAGNUM MINING EXP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Merck is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MAGNUM MINING and Merck

The main advantage of trading using opposite MAGNUM MINING and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGNUM 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 MAGNUM MINING EXP and Merck Company 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.