Correlation Between Merck and Charles
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By analyzing existing cross correlation between Merck Company and Charles River Laboratories, you can compare the effects of market volatilities on Merck and Charles 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 Charles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Charles.
Diversification Opportunities for Merck and Charles
Poor diversification
The 3 months correlation between Merck and Charles is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Charles River Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles River Labora 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 Charles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles River Labora has no effect on the direction of Merck i.e., Merck and Charles go up and down completely randomly.
Pair Corralation between Merck and Charles
Considering the 90-day investment horizon Merck Company is expected to generate 2.81 times more return on investment than Charles. However, Merck is 2.81 times more volatile than Charles River Laboratories. It trades about 0.0 of its potential returns per unit of risk. Charles River Laboratories is currently generating about -0.04 per unit of risk. If you would invest 10,188 in Merck Company on September 2, 2024 and sell it today you would lose (24.00) from holding Merck Company or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Merck Company vs. Charles River Laboratories
Performance |
| Timeline |
| Merck Company |
| Charles River Labora |
Merck and Charles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Charles
The main advantage of trading using opposite Merck and Charles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Charles 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 Charles will offset losses from the drop in Charles' long position.The idea behind Merck Company and Charles River Laboratories 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.| Charles vs. AEP TEX INC | Charles vs. US BANK NATIONAL | Charles vs. Bank of America | Charles vs. GE Aerospace |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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