Correlation Between Merck and Golden Tag

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

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

Diversification Opportunities for Merck and Golden Tag

0.83

Correlation Coefficient

Merck  Golden Tag

Very poor diversification

The 3 months correlation between Merck and Golden is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Golden Tag Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tag 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 Golden Tag. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tag Resources has no effect on the direction of Merck i.e., Merck and Golden Tag go up and down completely randomly.

Pair Corralation between Merck and Golden Tag

If you would invest  9.00  in Golden Tag Resources on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Golden Tag Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.55%
Values	Daily Returns

Merck Company  vs.  Golden Tag Resources

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Golden Tag Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tag Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Golden Tag is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Merck and Golden Tag

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

The idea behind Merck Company and Golden Tag 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.