Correlation Between Merck and Dermata Therapeutics
Can any of the company-specific risk be diversified away by investing in both Merck and Dermata 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 Dermata 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 Dermata Therapeutics, you can compare the effects of market volatilities on Merck and Dermata 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 Dermata Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Dermata Therapeutics.
Diversification Opportunities for Merck and Dermata Therapeutics
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Dermata is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Dermata Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dermata 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 Dermata Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dermata Therapeutics has no effect on the direction of Merck i.e., Merck and Dermata Therapeutics go up and down completely randomly.
Pair Corralation between Merck and Dermata Therapeutics
Considering the 90-day investment horizon Merck Company is expected to generate 0.24 times more return on investment than Dermata Therapeutics. However, Merck Company is 4.15 times less risky than Dermata Therapeutics. It trades about -0.28 of its potential returns per unit of risk. Dermata Therapeutics is currently generating about -0.12 per unit of risk. If you would invest 11,473 in Merck Company on August 26, 2024 and sell it today you would lose (1,555) from holding Merck Company or give up 13.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Dermata Therapeutics
Performance |
| Timeline |
| Merck Company |
| Dermata Therapeutics |
Merck and Dermata Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Dermata Therapeutics
The main advantage of trading using opposite Merck and Dermata Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Dermata 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 Dermata Therapeutics will offset losses from the drop in Dermata Therapeutics' long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Dermata Therapeutics vs. Zura Bio Limited | Dermata Therapeutics vs. Phio Pharmaceuticals Corp | Dermata Therapeutics vs. Sonnet Biotherapeutics Holdings | Dermata Therapeutics vs. 180 Life Sciences |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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