Correlation Between Merck and ConAgra Foods

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Merck and ConAgra Foods 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 ConAgra Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ConAgra Foods, you can compare the effects of market volatilities on Merck and ConAgra Foods 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 ConAgra Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ConAgra Foods.

Diversification Opportunities for Merck and ConAgra Foods

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Merck and ConAgra is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods 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 ConAgra Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConAgra Foods has no effect on the direction of Merck i.e., Merck and ConAgra Foods go up and down completely randomly.

Pair Corralation between Merck and ConAgra Foods

Considering the 90-day investment horizon Merck is expected to generate 1.29 times less return on investment than ConAgra Foods. But when comparing it to its historical volatility, Merck Company is 1.32 times less risky than ConAgra Foods. It trades about 0.13 of its potential returns per unit of risk. ConAgra Foods is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,807  in ConAgra Foods on January 15, 2024 and sell it today you would earn a total of  124.00  from holding ConAgra Foods or generate 4.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  ConAgra Foods

 Performance 
       Timeline  
Merck Company 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in May 2024.
ConAgra Foods 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ConAgra Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Merck and ConAgra Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and ConAgra Foods

The main advantage of trading using opposite Merck and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ConAgra Foods 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 ConAgra Foods will offset losses from the drop in ConAgra Foods' long position.
The idea behind Merck Company and ConAgra Foods 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.
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 Stocks Directory module to find actively traded stocks across global markets.

Other Complementary Tools

Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
ETF Categories
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon