Correlation Between Merck and Cleveland Cliffs

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Can any of the company-specific risk be diversified away by investing in both Merck and Cleveland Cliffs 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 Cleveland Cliffs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Cleveland-Cliffs, you can compare the effects of market volatilities on Merck and Cleveland Cliffs 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 Cleveland Cliffs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Cleveland Cliffs.

Diversification Opportunities for Merck and Cleveland Cliffs

  Correlation Coefficient

Good diversification

The 3 months correlation between Merck and Cleveland is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Cleveland-Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland-Cliffs 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 Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland-Cliffs has no effect on the direction of Merck i.e., Merck and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between Merck and Cleveland Cliffs

Considering the 90-day investment horizon Merck Company is expected to generate 0.39 times more return on investment than Cleveland Cliffs. However, Merck Company is 2.54 times less risky than Cleveland Cliffs. It trades about 0.01 of its potential returns per unit of risk. Cleveland-Cliffs is currently generating about -0.05 per unit of risk. If you would invest  8,507  in Merck Company on June 26, 2022 and sell it today you would earn a total of  171.00  from holding Merck Company or generate 2.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Merck Company  vs.  Cleveland-Cliffs

 Performance (%) 
Merck Company 
Merck Performance
0 of 100
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Merck Price Channel

Cleveland Performance
0 of 100
Over the last 90 days Cleveland-Cliffs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cleveland Price Channel

Merck and Cleveland Cliffs Volatility Contrast

   Predicted Return Density   

Pair Trading with Merck and Cleveland Cliffs

The main advantage of trading using opposite Merck and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Cleveland Cliffs 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 Cleveland Cliffs will offset losses from the drop in Cleveland Cliffs' long position.
Merck vs. Sigma Lithium Corp
The idea behind Merck Company and Cleveland-Cliffs 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.
Cleveland Cliffs vs. Sigma Lithium Corp
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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