Correlation Between Merck and Skyharbour Resources
Can any of the company-specific risk be diversified away by investing in both Merck and Skyharbour Resources 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 Skyharbour Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Skyharbour Resources, you can compare the effects of market volatilities on Merck and Skyharbour Resources 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 Skyharbour Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Skyharbour Resources.
Diversification Opportunities for Merck and Skyharbour Resources
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and Skyharbour is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Skyharbour Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyharbour Resources 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 Skyharbour Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyharbour Resources has no effect on the direction of Merck i.e., Merck and Skyharbour Resources go up and down completely randomly.
Pair Corralation between Merck and Skyharbour Resources
Considering the 90-day investment horizon Merck Company is expected to generate 0.87 times more return on investment than Skyharbour Resources. However, Merck Company is 1.14 times less risky than Skyharbour Resources. It trades about -0.12 of its potential returns per unit of risk. Skyharbour Resources is currently generating about -0.12 per unit of risk. If you would invest 9,895 in Merck Company on December 1, 2024 and sell it today you would lose (670.00) from holding Merck Company or give up 6.77% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Merck Company vs. Skyharbour Resources
Performance |
Timeline |
Merck Company |
Skyharbour Resources |
Merck and Skyharbour Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and Skyharbour Resources
The main advantage of trading using opposite Merck and Skyharbour Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Skyharbour Resources 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 Skyharbour Resources will offset losses from the drop in Skyharbour Resources' long position.The idea behind Merck Company and Skyharbour Resources 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.Skyharbour Resources vs. GoviEx Uranium | Skyharbour Resources vs. CanAlaska Uranium | Skyharbour Resources vs. Deep Yellow | Skyharbour Resources vs. Western Uranium Vanadium |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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