Correlation Between Merck and Giga Metals

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

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

Diversification Opportunities for Merck and Giga Metals

0.74

Correlation Coefficient

Merck  Giga Metals

Poor diversification

The 3 months correlation between Merck and Giga is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Giga Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giga 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 Giga Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giga Metals has no effect on the direction of Merck i.e., Merck and Giga Metals go up and down completely randomly.

Pair Corralation between Merck and Giga Metals

If you would invest  19.00  in Giga Metals on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Giga Metals or generate 0.0% return on investment over 90 days.

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

Merck Company  vs.  Giga Metals

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.

Giga Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Giga Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Giga Metals 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 Giga Metals

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

The idea behind Merck Company and Giga 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.