Correlation Between Merck and Resolute Forest
Can any of the company-specific risk be diversified away by investing in both Merck and Resolute Forest 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 Resolute Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Resolute Forest Products, you can compare the effects of market volatilities on Merck and Resolute Forest 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 Resolute Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Resolute Forest.
Diversification Opportunities for Merck and Resolute Forest
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Resolute is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Resolute Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resolute Forest Products 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 Resolute Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resolute Forest Products has no effect on the direction of Merck i.e., Merck and Resolute Forest go up and down completely randomly.
Pair Corralation between Merck and Resolute Forest
If you would invest (100.00) in Resolute Forest Products on December 8, 2024 and sell it today you would earn a total of 100.00 from holding Resolute Forest Products 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. Resolute Forest Products
Performance |
Timeline |
Merck Company |
Resolute Forest Products |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Merck and Resolute Forest Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and Resolute Forest
The main advantage of trading using opposite Merck and Resolute Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Resolute Forest 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 Resolute Forest will offset losses from the drop in Resolute Forest's long position.The idea behind Merck Company and Resolute Forest Products 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.Resolute Forest vs. Ecovyst | Resolute Forest vs. Olympic Steel | Resolute Forest vs. Parker Hannifin | Resolute Forest vs. Luxfer Holdings PLC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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