Correlation Between First Merchants and Tupperware Brands

Can any of the company-specific risk be diversified away by investing in both First Merchants and Tupperware 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 First Merchants and Tupperware Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and Tupperware Brands, you can compare the effects of market volatilities on First Merchants and Tupperware 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 First Merchants with a short position of Tupperware Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Tupperware Brands.

Diversification Opportunities for First Merchants and Tupperware Brands

-0.39

Correlation Coefficient

First Merchants  Tupperware Brands

Very good diversification

The 3 months correlation between First and Tupperware is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Tupperware Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tupperware Brands and First Merchants 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 First Merchants are associated (or correlated) with Tupperware Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tupperware Brands has no effect on the direction of First Merchants i.e., First Merchants and Tupperware Brands go up and down completely randomly.

Pair Corralation between First Merchants and Tupperware Brands

Given the investment horizon of 90 days First Merchants is expected to generate 0.2 times more return on investment than Tupperware Brands. However, First Merchants is 5.05 times less risky than Tupperware Brands. It trades about 0.02 of its potential returns per unit of risk. Tupperware Brands is currently generating about -0.02 per unit of risk. If you would invest  3,780  in First Merchants on September 25, 2024 and sell it today you would earn a total of  270.00  from holding First Merchants or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.52%
Values	Daily Returns

First Merchants  vs.  Tupperware Brands

First Merchants

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, First Merchants exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tupperware Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tupperware Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tupperware Brands is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Merchants and Tupperware Brands

The main advantage of trading using opposite First Merchants and Tupperware Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Tupperware 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 Tupperware Brands will offset losses from the drop in Tupperware Brands' long position.

The idea behind First Merchants and Tupperware 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.