Correlation Between Merck and Filo Mining

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

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

Diversification Opportunities for Merck and Filo Mining

0.18

Correlation Coefficient

Merck  Filo Mining

Average diversification

The 3 months correlation between Merck and Filo is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Filo Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Filo Mining Corp 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 Filo Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Filo Mining Corp has no effect on the direction of Merck i.e., Merck and Filo Mining go up and down completely randomly.

Pair Corralation between Merck and Filo Mining

Considering the 90-day investment horizon Merck Company is expected to under-perform the Filo Mining. In addition to that, Merck is 2.62 times more volatile than Filo Mining Corp. It trades about -0.2 of its total potential returns per unit of risk. Filo Mining Corp is currently generating about -0.04 per unit of volatility. If you would invest  2,217  in Filo Mining Corp on November 21, 2024 and sell it today you would lose (13.00) from holding Filo Mining Corp or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	47.37%
Values	Daily Returns

Merck Company  vs.  Filo Mining Corp

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 abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Filo Mining Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Filo Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Merck and Filo Mining

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

The idea behind Merck Company and Filo Mining Corp 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..