Correlation Between Merck and Tidal Commodities

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

By analyzing existing cross correlation between Merck Company and Tidal Commodities Trust, you can compare the effects of market volatilities on Merck and Tidal Commodities 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 Tidal Commodities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Tidal Commodities.

Diversification Opportunities for Merck and Tidal Commodities

0.12

Correlation Coefficient

Merck  Tidal Commodities

Average diversification

The 3 months correlation between Merck and Tidal is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Tidal Commodities Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal Commodities Trust 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 Tidal Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal Commodities Trust has no effect on the direction of Merck i.e., Merck and Tidal Commodities go up and down completely randomly.

Pair Corralation between Merck and Tidal Commodities

Considering the 90-day investment horizon Merck Company is expected to generate 0.59 times more return on investment than Tidal Commodities. However, Merck Company is 1.69 times less risky than Tidal Commodities. It trades about -0.07 of its potential returns per unit of risk. Tidal Commodities Trust is currently generating about -0.05 per unit of risk. If you would invest  9,753  in Merck Company on December 29, 2024 and sell it today you would lose (830.00) from holding Merck Company or give up 8.51% of portfolio value over 90 days.

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

Merck Company  vs.  Tidal Commodities Trust

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.

Tidal Commodities Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tidal Commodities Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Merck and Tidal Commodities

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

The idea behind Merck Company and Tidal Commodities Trust 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.