Correlation Between Merck and Cyclo Therapeutics
Can any of the company-specific risk be diversified away by investing in both Merck and Cyclo 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 Cyclo 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 Cyclo Therapeutics, you can compare the effects of market volatilities on Merck and Cyclo 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 Cyclo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Cyclo Therapeutics.
Diversification Opportunities for Merck and Cyclo Therapeutics
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Cyclo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Cyclo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclo 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 Cyclo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclo Therapeutics has no effect on the direction of Merck i.e., Merck and Cyclo Therapeutics go up and down completely randomly.
Pair Corralation between Merck and Cyclo Therapeutics
Considering the 90-day investment horizon Merck Company is expected to under-perform the Cyclo Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 19.24 times less risky than Cyclo Therapeutics. The stock trades about -0.22 of its potential returns per unit of risk. The Cyclo Therapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 9.60 in Cyclo Therapeutics on August 28, 2024 and sell it today you would earn a total of 4.40 from holding Cyclo Therapeutics or generate 45.83% 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. Cyclo Therapeutics
Performance |
| Timeline |
| Merck Company |
| Cyclo Therapeutics |
Merck and Cyclo Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Cyclo Therapeutics
The main advantage of trading using opposite Merck and Cyclo Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Cyclo 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 Cyclo Therapeutics will offset losses from the drop in Cyclo Therapeutics' long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Cyclo Therapeutics vs. Eliem Therapeutics | Cyclo Therapeutics vs. HCW Biologics | Cyclo Therapeutics vs. Scpharmaceuticals | Cyclo Therapeutics vs. Milestone 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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