Correlation Between Merck and CONSTELLATION
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By analyzing existing cross correlation between Merck Company and CONSTELLATION BRANDS INC, you can compare the effects of market volatilities on Merck and CONSTELLATION 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 CONSTELLATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CONSTELLATION.
Diversification Opportunities for Merck and CONSTELLATION
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and CONSTELLATION is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC 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 CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of Merck i.e., Merck and CONSTELLATION go up and down completely randomly.
Pair Corralation between Merck and CONSTELLATION
Considering the 90-day investment horizon Merck Company is expected to under-perform the CONSTELLATION. In addition to that, Merck is 4.58 times more volatile than CONSTELLATION BRANDS INC. It trades about -0.05 of its total potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about -0.05 per unit of volatility. If you would invest 9,306 in CONSTELLATION BRANDS INC on August 31, 2024 and sell it today you would lose (32.00) from holding CONSTELLATION BRANDS INC or give up 0.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. CONSTELLATION BRANDS INC
Performance |
| Timeline |
| Merck Company |
| CONSTELLATION BRANDS INC |
Merck and CONSTELLATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and CONSTELLATION
The main advantage of trading using opposite Merck and CONSTELLATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, CONSTELLATION 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 CONSTELLATION will offset losses from the drop in CONSTELLATION's long position.The idea behind Merck Company and CONSTELLATION BRANDS INC 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.| CONSTELLATION vs. Toro Co | CONSTELLATION vs. Kaltura | CONSTELLATION vs. World Houseware Limited | CONSTELLATION vs. Timken Company |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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