Correlation Between Metalrgica Riosulense and Merck

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

By analyzing existing cross correlation between Metalrgica Riosulense SA and Merck Co, you can compare the effects of market volatilities on Metalrgica Riosulense and Merck 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 Metalrgica Riosulense with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalrgica Riosulense and Merck.

Diversification Opportunities for Metalrgica Riosulense and Merck

-0.25

Correlation Coefficient

Metalrgica Riosulense  Merck

Very good diversification

The 3 months correlation between Metalrgica and Merck is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA and Merck Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck and Metalrgica Riosulense 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 Metalrgica Riosulense SA are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck has no effect on the direction of Metalrgica Riosulense i.e., Metalrgica Riosulense and Merck go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and Merck

Assuming the 90 days trading horizon Metalrgica Riosulense is expected to generate 6.79 times less return on investment than Merck. But when comparing it to its historical volatility, Metalrgica Riosulense SA is 1.67 times less risky than Merck. It trades about 0.01 of its potential returns per unit of risk. Merck Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,575  in Merck Co on October 1, 2024 and sell it today you would earn a total of  119.00  from holding Merck Co or generate 1.57% return on investment over 90 days.

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

Metalrgica Riosulense SA  vs.  Merck Co

Metalrgica Riosulense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalrgica Riosulense SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Merck

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Merck is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metalrgica Riosulense and Merck

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

The idea behind Metalrgica Riosulense SA and Merck Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..