Correlation Between Merck and Carmell Therapeutics
Can any of the company-specific risk be diversified away by investing in both Merck and Carmell Therapeutics 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 Carmell Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Carmell Therapeutics, you can compare the effects of market volatilities on Merck and Carmell Therapeutics 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 Carmell Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Carmell Therapeutics.
Diversification Opportunities for Merck and Carmell Therapeutics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Carmell is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Carmell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmell Therapeutics 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 Carmell Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmell Therapeutics has no effect on the direction of Merck i.e., Merck and Carmell Therapeutics go up and down completely randomly.
Pair Corralation between Merck and Carmell Therapeutics
Considering the 90-day investment horizon Merck Company is expected to under-perform the Carmell Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 15.03 times less risky than Carmell Therapeutics. The stock trades about -0.04 of its potential returns per unit of risk. The Carmell Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 23.00 in Carmell Therapeutics on January 10, 2025 and sell it today you would lose (20.33) from holding Carmell Therapeutics or give up 88.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 39.56% |
| Values | Daily Returns |
Merck Company vs. Carmell Therapeutics
Performance |
| Timeline |
| Merck Company |
| Carmell Therapeutics |
Risk-Adjusted Performance
Insignificant
Weak | Strong |
Merck and Carmell Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Carmell Therapeutics
The main advantage of trading using opposite Merck and Carmell Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Carmell Therapeutics 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 Carmell Therapeutics will offset losses from the drop in Carmell Therapeutics' long position.| Merck vs. Upper Street Marketing | Merck vs. Virtual Medical International | Merck vs. Grey Cloak Tech | Merck vs. CuraScientific Corp |
| Carmell Therapeutics vs. Tritent International Agriculture | Carmell Therapeutics vs. Griffon | Carmell Therapeutics vs. Stepan Company | Carmell Therapeutics vs. ChampionX |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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