Correlation Between Merck and Biohaven Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Merck and Biohaven Pharmaceutical 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 Biohaven Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Biohaven Pharmaceutical Holding, you can compare the effects of market volatilities on Merck and Biohaven Pharmaceutical 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 Biohaven Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Biohaven Pharmaceutical.
Diversification Opportunities for Merck and Biohaven Pharmaceutical
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Biohaven is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Biohaven Pharmaceutical Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biohaven Pharmaceutical 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 Biohaven Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biohaven Pharmaceutical has no effect on the direction of Merck i.e., Merck and Biohaven Pharmaceutical go up and down completely randomly.
Pair Corralation between Merck and Biohaven Pharmaceutical
Considering the 90-day investment horizon Merck Company is expected to under-perform the Biohaven Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.98 times less risky than Biohaven Pharmaceutical. The stock trades about -0.18 of its potential returns per unit of risk. The Biohaven Pharmaceutical Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,101 in Biohaven Pharmaceutical Holding on August 28, 2024 and sell it today you would earn a total of 422.00 from holding Biohaven Pharmaceutical Holding or generate 10.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Biohaven Pharmaceutical Holdin
Performance |
| Timeline |
| Merck Company |
| Biohaven Pharmaceutical |
Merck and Biohaven Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Biohaven Pharmaceutical
The main advantage of trading using opposite Merck and Biohaven Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Biohaven Pharmaceutical 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 Biohaven Pharmaceutical will offset losses from the drop in Biohaven Pharmaceutical's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Biohaven Pharmaceutical vs. Immunome | Biohaven Pharmaceutical vs. Inhibrx | Biohaven Pharmaceutical vs. Day One Biopharmaceuticals | Biohaven Pharmaceutical vs. Terns Pharmaceuticals |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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