Correlation Between Merck and Ibio
Can any of the company-specific risk be diversified away by investing in both Merck and Ibio 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 Ibio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Ibio Inc, you can compare the effects of market volatilities on Merck and Ibio 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 Ibio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Ibio.
Diversification Opportunities for Merck and Ibio
Excellent diversification
The 3 months correlation between Merck and Ibio is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ibio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ibio Inc 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 Ibio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ibio Inc has no effect on the direction of Merck i.e., Merck and Ibio go up and down completely randomly.
Pair Corralation between Merck and Ibio
Considering the 90-day investment horizon Merck Company is expected to under-perform the Ibio. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 4.35 times less risky than Ibio. The stock trades about -0.18 of its potential returns per unit of risk. The Ibio Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 187.00 in Ibio Inc on August 29, 2024 and sell it today you would earn a total of 67.00 from holding Ibio Inc or generate 35.83% 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. Ibio Inc
Performance |
| Timeline |
| Merck Company |
| Ibio Inc |
Merck and Ibio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Ibio
The main advantage of trading using opposite Merck and Ibio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Ibio 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 Ibio will offset losses from the drop in Ibio's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Ibio vs. Jaguar Animal Health | Ibio vs. GeoVax Labs | Ibio vs. Ocugen Inc | Ibio vs. Tonix Pharmaceuticals Holding |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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