Correlation Between Merck and Sovos Brands
Can any of the company-specific risk be diversified away by investing in both Merck and Sovos Brands 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 Sovos Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Sovos Brands, you can compare the effects of market volatilities on Merck and Sovos Brands 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 Sovos Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Sovos Brands.
Diversification Opportunities for Merck and Sovos Brands
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Sovos is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Sovos Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovos Brands 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 Sovos Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovos Brands has no effect on the direction of Merck i.e., Merck and Sovos Brands go up and down completely randomly.
Pair Corralation between Merck and Sovos Brands
If you would invest 1,862 in Sovos Brands on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Sovos Brands or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Merck Company vs. Sovos Brands
Performance |
| Timeline |
| Merck Company |
| Sovos Brands |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Sovos Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Sovos Brands
The main advantage of trading using opposite Merck and Sovos Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Sovos Brands 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 Sovos Brands will offset losses from the drop in Sovos Brands' long position.The idea behind Merck Company and Sovos Brands 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.| Sovos Brands vs. Seneca Foods Corp | Sovos Brands vs. J J Snack | Sovos Brands vs. Simply Good Foods | Sovos Brands vs. Central Garden Pet |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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