Correlation Between Merck and York Harbour

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

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

Diversification Opportunities for Merck and York Harbour

0.11

Correlation Coefficient

Merck  York Harbour

Average diversification

The 3 months correlation between Merck and York is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and York Harbour Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on York Harbour Metals 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 York Harbour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of York Harbour Metals has no effect on the direction of Merck i.e., Merck and York Harbour go up and down completely randomly.

Pair Corralation between Merck and York Harbour

Considering the 90-day investment horizon Merck Company is expected to under-perform the York Harbour. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 5.71 times less risky than York Harbour. The stock trades about -0.32 of its potential returns per unit of risk. The York Harbour Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.06  in York Harbour Metals on November 20, 2024 and sell it today you would lose (0.14) from holding York Harbour Metals or give up 4.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Merck Company  vs.  York Harbour Metals

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 unsteady 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.

York Harbour Metals

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Merck and York Harbour

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

The idea behind Merck Company and York Harbour Metals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.