Correlation Between Merck and Thor Industries
Can any of the company-specific risk be diversified away by investing in both Merck and Thor Industries 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 Thor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Thor Industries, you can compare the effects of market volatilities on Merck and Thor Industries 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 Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Thor Industries.
Diversification Opportunities for Merck and Thor Industries
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merck and Thor is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Merck i.e., Merck and Thor Industries go up and down completely randomly.
Pair Corralation between Merck and Thor Industries
Considering the 90-day investment horizon Merck is expected to generate 1.19 times less return on investment than Thor Industries. But when comparing it to its historical volatility, Merck Company is 2.19 times less risky than Thor Industries. It trades about 0.07 of its potential returns per unit of risk. Thor Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,169 in Thor Industries on January 21, 2024 and sell it today you would earn a total of 2,769 from holding Thor Industries or generate 38.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
Merck Company vs. Thor Industries
Performance |
| Timeline |
| Merck Company |
| Thor Industries |
Merck and Thor Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Thor Industries
The main advantage of trading using opposite Merck and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Thor Industries 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 Thor Industries will offset losses from the drop in Thor Industries' long position.| Merck vs. Alkermes Plc | Merck vs. Ironwood Pharmaceuticals | Merck vs. Deciphera Pharmaceuticals LLC | Merck vs. Eagle Pharmaceuticals |
| Thor Industries vs. Marine Products | Thor Industries vs. Malibu Boats | Thor Industries vs. Brunswick | Thor Industries vs. LCI Industries |
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 CEOs Directory module to screen CEOs from public companies around the world.
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