Correlation Between Merck and Akebia Ther
Can any of the company-specific risk be diversified away by investing in both Merck and Akebia Ther 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 Akebia Ther into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Akebia Ther, you can compare the effects of market volatilities on Merck and Akebia Ther 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 Akebia Ther. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Akebia Ther.
Diversification Opportunities for Merck and Akebia Ther
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Akebia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Akebia Ther in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akebia Ther 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 Akebia Ther. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akebia Ther has no effect on the direction of Merck i.e., Merck and Akebia Ther go up and down completely randomly.
Pair Corralation between Merck and Akebia Ther
Considering the 90-day investment horizon Merck Company is expected to under-perform the Akebia Ther. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.81 times less risky than Akebia Ther. The stock trades about -0.25 of its potential returns per unit of risk. The Akebia Ther is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 179.00 in Akebia Ther on November 9, 2024 and sell it today you would earn a total of 37.00 from holding Akebia Ther or generate 20.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Akebia Ther
Performance |
| Timeline |
| Merck Company |
| Akebia Ther |
Merck and Akebia Ther Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Akebia Ther
The main advantage of trading using opposite Merck and Akebia Ther positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Akebia Ther 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 Akebia Ther will offset losses from the drop in Akebia Ther's long position.The idea behind Merck Company and Akebia Ther 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.| Akebia Ther vs. Protalix Biotherapeutics | Akebia Ther vs. Cidara Therapeutics | Akebia Ther vs. X4 Pharmaceuticals | Akebia Ther vs. Seres Therapeutics |
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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