Correlation Between Merck and MicroSectors Gold
Can any of the company-specific risk be diversified away by investing in both Merck and MicroSectors Gold 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 MicroSectors Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and MicroSectors Gold Miners, you can compare the effects of market volatilities on Merck and MicroSectors Gold 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 MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and MicroSectors Gold.
Diversification Opportunities for Merck and MicroSectors Gold
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and MicroSectors is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and MicroSectors Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold Miners 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 MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold Miners has no effect on the direction of Merck i.e., Merck and MicroSectors Gold go up and down completely randomly.
Pair Corralation between Merck and MicroSectors Gold
Considering the 90-day investment horizon Merck is expected to generate 3.28 times less return on investment than MicroSectors Gold. But when comparing it to its historical volatility, Merck Company is 3.78 times less risky than MicroSectors Gold. It trades about 0.07 of its potential returns per unit of risk. MicroSectors Gold Miners is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,613 in MicroSectors Gold Miners on March 18, 2025 and sell it today you would earn a total of 480.00 from holding MicroSectors Gold Miners or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. MicroSectors Gold Miners
Performance |
| Timeline |
| Merck Company |
| MicroSectors Gold Miners |
Merck and MicroSectors Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and MicroSectors Gold
The main advantage of trading using opposite Merck and MicroSectors Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, MicroSectors Gold 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 MicroSectors Gold will offset losses from the drop in MicroSectors Gold's long position.The idea behind Merck Company and MicroSectors Gold Miners 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.| MicroSectors Gold vs. First Trust Exchange Traded | MicroSectors Gold vs. Ultimus Managers Trust | MicroSectors Gold vs. Horizon Kinetics Medical | MicroSectors Gold vs. Harbor Health Care |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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