Correlation Between Costco Wholesale and Merck
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Merck 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 Costco Wholesale and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Merck Company, you can compare the effects of market volatilities on Costco Wholesale and Merck 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 Costco Wholesale with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Merck.
Diversification Opportunities for Costco Wholesale and Merck
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Costco and Merck is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Costco Wholesale 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 Costco Wholesale are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Merck go up and down completely randomly.
Pair Corralation between Costco Wholesale and Merck
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.89 times more return on investment than Merck. However, Costco Wholesale is 1.12 times less risky than Merck. It trades about 0.01 of its potential returns per unit of risk. Merck Company is currently generating about -0.08 per unit of risk. If you would invest 1,901,935 in Costco Wholesale on December 29, 2024 and sell it today you would lose (3,635) from holding Costco Wholesale or give up 0.19% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.41% |
Values | Daily Returns |
Costco Wholesale vs. Merck Company
Performance |
Timeline |
Costco Wholesale |
Merck Company |
Costco Wholesale and Merck Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Costco Wholesale and Merck
The main advantage of trading using opposite Costco Wholesale and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.Costco Wholesale vs. Lloyds Banking Group | Costco Wholesale vs. Grupo Industrial Saltillo | Costco Wholesale vs. DXC Technology | Costco Wholesale vs. United Airlines Holdings |
Merck vs. Delta Air Lines | Merck vs. The Bank of | Merck vs. Grupo Industrial Saltillo | Merck vs. New Oriental Education |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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