Correlation Between Merck and Tarku Resources

Can any of the company-specific risk be diversified away by investing in both Merck and Tarku 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 Tarku 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 Tarku Resources, you can compare the effects of market volatilities on Merck and Tarku 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 Tarku Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Tarku Resources.

Diversification Opportunities for Merck and Tarku Resources

0.13

Correlation Coefficient

Merck  Tarku Resources

Average diversification

The 3 months correlation between Merck and Tarku is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Tarku Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarku 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 Tarku Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarku Resources has no effect on the direction of Merck i.e., Merck and Tarku Resources go up and down completely randomly.

Pair Corralation between Merck and Tarku Resources

Considering the 90-day investment horizon Merck Company is expected to generate 0.58 times more return on investment than Tarku Resources. However, Merck Company is 1.73 times less risky than Tarku Resources. It trades about -0.12 of its potential returns per unit of risk. Tarku Resources is currently generating about -0.22 per unit of risk. If you would invest  9,979  in Merck Company on December 3, 2024 and sell it today you would lose (664.00) from holding Merck Company or give up 6.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Merck Company  vs.  Tarku Resources

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.

Tarku Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tarku Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tarku Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Tarku Resources

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

The idea behind Merck Company and Tarku 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.