Correlation Between Merck and Arcellx
Can any of the company-specific risk be diversified away by investing in both Merck and Arcellx 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 Arcellx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Arcellx, you can compare the effects of market volatilities on Merck and Arcellx 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 Arcellx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Arcellx.
Diversification Opportunities for Merck and Arcellx
Excellent diversification
The 3 months correlation between Merck and Arcellx is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Arcellx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcellx 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 Arcellx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcellx has no effect on the direction of Merck i.e., Merck and Arcellx go up and down completely randomly.
Pair Corralation between Merck and Arcellx
Considering the 90-day investment horizon Merck Company is expected to under-perform the Arcellx. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.73 times less risky than Arcellx. The stock trades about -0.1 of its potential returns per unit of risk. The Arcellx is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8,499 in Arcellx on August 28, 2024 and sell it today you would earn a total of 442.00 from holding Arcellx or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Arcellx
Performance |
| Timeline |
| Merck Company |
| Arcellx |
Merck and Arcellx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Arcellx
The main advantage of trading using opposite Merck and Arcellx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Arcellx 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 Arcellx will offset losses from the drop in Arcellx's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Arcellx vs. Nuvalent | Arcellx vs. Ventyx Biosciences | Arcellx vs. Amylyx Pharmaceuticals | Arcellx vs. Day One Biopharmaceuticals |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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