Correlation Between Merck and ConAgra Foods
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
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and ConAgra is -0.56. 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 Company is expected to under-perform the ConAgra Foods. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.03 times less risky than ConAgra Foods. The stock trades about -0.11 of its potential returns per unit of risk. The ConAgra Foods is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,807 in ConAgra Foods on July 8, 2024 and sell it today you would earn a total of 144.00 from holding ConAgra Foods or generate 5.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Merck Company vs. ConAgra Foods
Performance |
Timeline |
Merck Company |
ConAgra Foods |
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.Merck vs. PetIQ Inc | Merck vs. Emergent Biosolutions | Merck vs. Neurocrine Biosciences | Merck vs. Haleon plc |
ConAgra Foods vs. General Mills | ConAgra Foods vs. McCormick Company Incorporated | ConAgra Foods vs. JM Smucker |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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