Correlation Between Merck and Eledon Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Merck and Eledon Pharmaceuticals 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 Eledon Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Eledon Pharmaceuticals, you can compare the effects of market volatilities on Merck and Eledon Pharmaceuticals 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 Eledon Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Eledon Pharmaceuticals.
Diversification Opportunities for Merck and Eledon Pharmaceuticals
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Merck and Eledon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Eledon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eledon Pharmaceuticals 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 Eledon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eledon Pharmaceuticals has no effect on the direction of Merck i.e., Merck and Eledon Pharmaceuticals go up and down completely randomly.
Pair Corralation between Merck and Eledon Pharmaceuticals
Considering the 90-day investment horizon Merck Company is expected to generate 0.33 times more return on investment than Eledon Pharmaceuticals. However, Merck Company is 3.06 times less risky than Eledon Pharmaceuticals. It trades about -0.03 of its potential returns per unit of risk. Eledon Pharmaceuticals is currently generating about -0.02 per unit of risk. If you would invest 9,972 in Merck Company on November 5, 2024 and sell it today you would lose (90.00) from holding Merck Company or give up 0.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Eledon Pharmaceuticals
Performance |
| Timeline |
| Merck Company |
| Eledon Pharmaceuticals |
Merck and Eledon Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Eledon Pharmaceuticals
The main advantage of trading using opposite Merck and Eledon Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Eledon Pharmaceuticals 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 Eledon Pharmaceuticals will offset losses from the drop in Eledon Pharmaceuticals' long position.The idea behind Merck Company and Eledon Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Eledon Pharmaceuticals vs. Inozyme Pharma | Eledon Pharmaceuticals vs. Day One Biopharmaceuticals | Eledon Pharmaceuticals vs. Terns Pharmaceuticals | Eledon Pharmaceuticals vs. Hookipa Pharma |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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