Correlation Between Merck and Bellevue Gold

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

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

Diversification Opportunities for Merck and Bellevue Gold

-0.7

Correlation Coefficient

Merck  Bellevue Gold

Excellent diversification

The 3 months correlation between Merck and Bellevue is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Bellevue Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellevue Gold Limited and Merck 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 Merck Company are associated (or correlated) with Bellevue Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellevue Gold Limited has no effect on the direction of Merck i.e., Merck and Bellevue Gold go up and down completely randomly.

Pair Corralation between Merck and Bellevue Gold

Considering the 90-day investment horizon Merck Company is expected to under-perform the Bellevue Gold. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.58 times less risky than Bellevue Gold. The stock trades about -0.07 of its potential returns per unit of risk. The Bellevue Gold Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Bellevue Gold Limited on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Bellevue Gold Limited or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Merck Company  vs.  Bellevue Gold Limited

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 latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bellevue Gold Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bellevue Gold Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Bellevue Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Merck and Bellevue Gold

The main advantage of trading using opposite Merck and Bellevue Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Bellevue Gold 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 Bellevue Gold will offset losses from the drop in Bellevue Gold's long position.

The idea behind Merck Company and Bellevue Gold Limited 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.