Correlation Between Merck and Bionomics
Can any of the company-specific risk be diversified away by investing in both Merck and Bionomics 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 Bionomics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Bionomics Ltd ADR, you can compare the effects of market volatilities on Merck and Bionomics 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 Bionomics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Bionomics.
Diversification Opportunities for Merck and Bionomics
Poor diversification
The 3 months correlation between Merck and Bionomics is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Bionomics Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bionomics ADR 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 Bionomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bionomics ADR has no effect on the direction of Merck i.e., Merck and Bionomics go up and down completely randomly.
Pair Corralation between Merck and Bionomics
Considering the 90-day investment horizon Merck is expected to generate 22.22 times less return on investment than Bionomics. But when comparing it to its historical volatility, Merck Company is 12.71 times less risky than Bionomics. It trades about 0.01 of its potential returns per unit of risk. Bionomics Ltd ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 420.00 in Bionomics Ltd ADR on August 27, 2024 and sell it today you would lose (391.00) from holding Bionomics Ltd ADR or give up 93.1% 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. Bionomics Ltd ADR
Performance |
| Timeline |
| Merck Company |
| Bionomics ADR |
Merck and Bionomics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Bionomics
The main advantage of trading using opposite Merck and Bionomics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Bionomics 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 Bionomics will offset losses from the drop in Bionomics' long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Bionomics vs. Accustem Sciences | Bionomics vs. Scisparc | Bionomics vs. Anebulo Pharmaceuticals | Bionomics vs. Pmv 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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