Correlation Between Merck and Tortoise Energy

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

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

Diversification Opportunities for Merck and Tortoise Energy

0.0

Correlation Coefficient

Merck  Tortoise Energy

Pay attention - limited upside

The 3 months correlation between Merck and Tortoise is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Tortoise Energy Independence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tortoise Energy Inde 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 Tortoise Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tortoise Energy Inde has no effect on the direction of Merck i.e., Merck and Tortoise Energy go up and down completely randomly.

Pair Corralation between Merck and Tortoise Energy

If you would invest (100.00) in Tortoise Energy Independence on November 29, 2024 and sell it today you would earn a total of  100.00  from holding Tortoise Energy Independence or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Merck Company  vs.  Tortoise Energy Independence

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 abnormal 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.

Tortoise Energy Inde

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tortoise Energy Independence has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable fundamental indicators, Tortoise Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Merck and Tortoise Energy

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

The idea behind Merck Company and Tortoise Energy Independence 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.