Correlation Between Merrimack Pharmaceuticals and NextCure
Can any of the company-specific risk be diversified away by investing in both Merrimack Pharmaceuticals and NextCure 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 Merrimack Pharmaceuticals and NextCure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merrimack Pharmaceuticals and NextCure, you can compare the effects of market volatilities on Merrimack Pharmaceuticals and NextCure 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 Merrimack Pharmaceuticals with a short position of NextCure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merrimack Pharmaceuticals and NextCure.
Diversification Opportunities for Merrimack Pharmaceuticals and NextCure
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merrimack and NextCure is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Merrimack Pharmaceuticals and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Merrimack Pharmaceuticals 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 Merrimack Pharmaceuticals are associated (or correlated) with NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Merrimack Pharmaceuticals i.e., Merrimack Pharmaceuticals and NextCure go up and down completely randomly.
Pair Corralation between Merrimack Pharmaceuticals and NextCure
Given the investment horizon of 90 days Merrimack Pharmaceuticals is expected to generate 6.84 times less return on investment than NextCure. But when comparing it to its historical volatility, Merrimack Pharmaceuticals is 3.7 times less risky than NextCure. It trades about 0.0 of its potential returns per unit of risk. NextCure is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 162.00 in NextCure on August 28, 2024 and sell it today you would lose (42.00) from holding NextCure or give up 25.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 28.78% |
| Values | Daily Returns |
Merrimack Pharmaceuticals vs. NextCure
Performance |
| Timeline |
| Merrimack Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| NextCure |
Merrimack Pharmaceuticals and NextCure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merrimack Pharmaceuticals and NextCure
The main advantage of trading using opposite Merrimack Pharmaceuticals and NextCure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merrimack Pharmaceuticals position performs unexpectedly, NextCure 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 NextCure will offset losses from the drop in NextCure's long position.| Merrimack Pharmaceuticals vs. Amicus Therapeutics | Merrimack Pharmaceuticals vs. Celldex Therapeutics | Merrimack Pharmaceuticals vs. Puma Biotechnology | Merrimack Pharmaceuticals vs. Agios Pharm |
| NextCure vs. CytomX Therapeutics | NextCure vs. Spero Therapeutics | NextCure vs. Instil Bio | NextCure vs. Assembly Biosciences |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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