Correlation Between Merck and Atea Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Merck and Atea Pharmaceuticals 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 Atea Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Atea Pharmaceuticals, you can compare the effects of market volatilities on Merck and Atea Pharmaceuticals 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 Atea Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Atea Pharmaceuticals.
Diversification Opportunities for Merck and Atea Pharmaceuticals
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Atea is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Atea Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea Pharmaceuticals 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 Atea Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea Pharmaceuticals has no effect on the direction of Merck i.e., Merck and Atea Pharmaceuticals go up and down completely randomly.
Pair Corralation between Merck and Atea Pharmaceuticals
Considering the 90-day investment horizon Merck Company is expected to generate 0.52 times more return on investment than Atea Pharmaceuticals. However, Merck Company is 1.91 times less risky than Atea Pharmaceuticals. It trades about -0.03 of its potential returns per unit of risk. Atea Pharmaceuticals is currently generating about -0.05 per unit of risk. If you would invest 10,423 in Merck Company on August 29, 2024 and sell it today you would lose (112.50) from holding Merck Company or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Atea Pharmaceuticals
Performance |
| Timeline |
| Merck Company |
| Atea Pharmaceuticals |
Merck and Atea Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Atea Pharmaceuticals
The main advantage of trading using opposite Merck and Atea Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Atea Pharmaceuticals 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 Atea Pharmaceuticals will offset losses from the drop in Atea Pharmaceuticals' long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Atea Pharmaceuticals vs. Immix Biopharma | Atea Pharmaceuticals vs. Cns Pharmaceuticals | Atea Pharmaceuticals vs. Hepion Pharmaceuticals | Atea Pharmaceuticals vs. Enveric 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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