Correlation Between Merck and Mesoblast
Can any of the company-specific risk be diversified away by investing in both Merck and Mesoblast 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 Mesoblast into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Mesoblast, you can compare the effects of market volatilities on Merck and Mesoblast 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 Mesoblast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Mesoblast.
Diversification Opportunities for Merck and Mesoblast
Significant diversification
The 3 months correlation between Merck and Mesoblast is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Mesoblast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesoblast 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 Mesoblast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesoblast has no effect on the direction of Merck i.e., Merck and Mesoblast go up and down completely randomly.
Pair Corralation between Merck and Mesoblast
Considering the 90-day investment horizon Merck Company is expected to generate 0.37 times more return on investment than Mesoblast. However, Merck Company is 2.72 times less risky than Mesoblast. It trades about 0.0 of its potential returns per unit of risk. Mesoblast is currently generating about -0.07 per unit of risk. If you would invest 9,917 in Merck Company on November 2, 2024 and sell it today you would lose (22.00) from holding Merck Company or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 89.47% |
| Values | Daily Returns |
Merck Company vs. Mesoblast
Performance |
| Timeline |
| Merck Company |
| Mesoblast |
Merck and Mesoblast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Mesoblast
The main advantage of trading using opposite Merck and Mesoblast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Mesoblast 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 Mesoblast will offset losses from the drop in Mesoblast's long position.| Merck vs. Collegium Pharmaceutical | Merck vs. Phibro Animal Health | Merck vs. ANI Pharmaceuticals | Merck vs. Procaps Group SA |
| Mesoblast vs. Aditxt Inc | Mesoblast vs. Lipocine | Mesoblast vs. Connect Biopharma Holdings | Mesoblast vs. Acumen Pharmaceuticals |
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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