Correlation Between Bio Path and Merck
Can any of the company-specific risk be diversified away by investing in both Bio Path 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 Bio Path and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bio Path Holdings and Merck Company, you can compare the effects of market volatilities on Bio Path 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 Bio Path with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bio Path and Merck.
Diversification Opportunities for Bio Path and Merck
Weak diversification
The 3 months correlation between Bio and Merck is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bio Path Holdings and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Bio Path 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 Bio Path Holdings 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 Bio Path i.e., Bio Path and Merck go up and down completely randomly.
Pair Corralation between Bio Path and Merck
Given the investment horizon of 90 days Bio Path Holdings is expected to under-perform the Merck. In addition to that, Bio Path is 3.99 times more volatile than Merck Company. It trades about -0.21 of its total potential returns per unit of risk. Merck Company is currently generating about -0.22 per unit of volatility. If you would invest 10,588 in Merck Company on August 25, 2024 and sell it today you would lose (670.00) from holding Merck Company or give up 6.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bio Path Holdings vs. Merck Company
Performance |
| Timeline |
| Bio Path Holdings |
| Merck Company |
Bio Path and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bio Path and Merck
The main advantage of trading using opposite Bio Path and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bio Path 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.| Bio Path vs. Capricor Therapeutics | Bio Path vs. NextCure | Bio Path vs. Pulmatrix | Bio Path vs. Crinetics Pharmaceuticals |
| Merck vs. Capricor Therapeutics | Merck vs. Akari Therapeutics PLC | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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