Correlation Between Merck and Monte Rosa
Can any of the company-specific risk be diversified away by investing in both Merck and Monte Rosa 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 Monte Rosa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Monte Rosa Therapeutics, you can compare the effects of market volatilities on Merck and Monte Rosa 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 Monte Rosa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Monte Rosa.
Diversification Opportunities for Merck and Monte Rosa
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Monte is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Monte Rosa Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monte Rosa 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 Monte Rosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monte Rosa Therapeutics has no effect on the direction of Merck i.e., Merck and Monte Rosa go up and down completely randomly.
Pair Corralation between Merck and Monte Rosa
Considering the 90-day investment horizon Merck Company is expected to under-perform the Monte Rosa. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 16.46 times less risky than Monte Rosa. The stock trades about -0.22 of its potential returns per unit of risk. The Monte Rosa Therapeutics is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 531.00 in Monte Rosa Therapeutics on August 23, 2024 and sell it today you would earn a total of 304.00 from holding Monte Rosa Therapeutics or generate 57.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Monte Rosa Therapeutics
Performance |
| Timeline |
| Merck Company |
| Monte Rosa Therapeutics |
Merck and Monte Rosa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Monte Rosa
The main advantage of trading using opposite Merck and Monte Rosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Monte Rosa 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 Monte Rosa will offset losses from the drop in Monte Rosa's long position.| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
| Monte Rosa vs. Nkarta Inc | Monte Rosa vs. Lyell Immunopharma | Monte Rosa vs. Generation Bio Co | Monte Rosa vs. Sana Biotechnology |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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