Correlation Between Merck and Evoke Pharma
Can any of the company-specific risk be diversified away by investing in both Merck and Evoke Pharma 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 Evoke Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Evoke Pharma, you can compare the effects of market volatilities on Merck and Evoke Pharma 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 Evoke Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Evoke Pharma.
Diversification Opportunities for Merck and Evoke Pharma
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Evoke is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Evoke Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evoke Pharma 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 Evoke Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evoke Pharma has no effect on the direction of Merck i.e., Merck and Evoke Pharma go up and down completely randomly.
Pair Corralation between Merck and Evoke Pharma
Considering the 90-day investment horizon Merck Company is expected to under-perform the Evoke Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 4.36 times less risky than Evoke Pharma. The stock trades about -0.1 of its potential returns per unit of risk. The Evoke Pharma is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 517.00 in Evoke Pharma on August 28, 2024 and sell it today you would lose (82.00) from holding Evoke Pharma or give up 15.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Evoke Pharma
Performance |
| Timeline |
| Merck Company |
| Evoke Pharma |
Merck and Evoke Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Evoke Pharma
The main advantage of trading using opposite Merck and Evoke Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Evoke Pharma 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 Evoke Pharma will offset losses from the drop in Evoke Pharma's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Evoke Pharma vs. Petros Pharmaceuticals | Evoke Pharma vs. Cumberland Pharmaceuticals | Evoke Pharma vs. Painreform | Evoke Pharma vs. Aquestive Therapeutics |
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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