Correlation Between Merck and Card Factory
Can any of the company-specific risk be diversified away by investing in both Merck and Card Factory 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 Card Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Card Factory plc, you can compare the effects of market volatilities on Merck and Card Factory 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 Card Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Card Factory.
Diversification Opportunities for Merck and Card Factory
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Card is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Card Factory plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Card Factory plc 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 Card Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Card Factory plc has no effect on the direction of Merck i.e., Merck and Card Factory go up and down completely randomly.
Pair Corralation between Merck and Card Factory
Considering the 90-day investment horizon Merck Company is expected to under-perform the Card Factory. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 41.65 times less risky than Card Factory. The stock trades about 0.0 of its potential returns per unit of risk. The Card Factory plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2.26 in Card Factory plc on August 31, 2024 and sell it today you would earn a total of 115.74 from holding Card Factory plc or generate 5121.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Merck Company vs. Card Factory plc
Performance |
| Timeline |
| Merck Company |
| Card Factory plc |
Merck and Card Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Card Factory
The main advantage of trading using opposite Merck and Card Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Card Factory 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 Card Factory will offset losses from the drop in Card Factory's long position.The idea behind Merck Company and Card Factory plc 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.| Card Factory vs. Ulta Beauty | Card Factory vs. Williams Sonoma | Card Factory vs. Dicks Sporting Goods | Card Factory vs. Best Buy Co |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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