Correlation Between Merck and Country Garden

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

By analyzing existing cross correlation between Merck Company and Country Garden Holdings, you can compare the effects of market volatilities on Merck and Country Garden 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 Country Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Country Garden.

Diversification Opportunities for Merck and Country Garden

-0.82

Correlation Coefficient

Merck  Country Garden

Pay attention - limited upside

The 3 months correlation between Merck and Country is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Country Garden Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Country Garden Holdings 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 Country Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Country Garden Holdings has no effect on the direction of Merck i.e., Merck and Country Garden go up and down completely randomly.

Pair Corralation between Merck and Country Garden

Considering the 90-day investment horizon Merck Company is expected to under-perform the Country Garden. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 12.47 times less risky than Country Garden. The stock trades about -0.18 of its potential returns per unit of risk. The Country Garden Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  147.00  in Country Garden Holdings on September 13, 2024 and sell it today you would earn a total of  228.00  from holding Country Garden Holdings or generate 155.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	73.02%
Values	Daily Returns

Merck Company  vs.  Country Garden Holdings

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Country Garden Holdings

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Country Garden Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Country Garden showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Country Garden

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

The idea behind Merck Company and Country Garden Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.