Correlation Between Merck and Morphic Holding
Can any of the company-specific risk be diversified away by investing in both Merck and Morphic Holding 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 Morphic Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Morphic Holding, you can compare the effects of market volatilities on Merck and Morphic Holding 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 Morphic Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Morphic Holding.
Diversification Opportunities for Merck and Morphic Holding
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Morphic is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Morphic Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morphic Holding 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 Morphic Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morphic Holding has no effect on the direction of Merck i.e., Merck and Morphic Holding go up and down completely randomly.
Pair Corralation between Merck and Morphic Holding
Considering the 90-day investment horizon Merck is expected to generate 5.23 times less return on investment than Morphic Holding. But when comparing it to its historical volatility, Merck Company is 7.46 times less risky than Morphic Holding. It trades about 0.01 of its potential returns per unit of risk. Morphic Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,409 in Morphic Holding on September 14, 2024 and sell it today you would lose (2,409) from holding Morphic Holding or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 69.52% |
| Values | Daily Returns |
Merck Company vs. Morphic Holding
Performance |
| Timeline |
| Merck Company |
| Morphic Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Morphic Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Morphic Holding
The main advantage of trading using opposite Merck and Morphic Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Morphic Holding 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 Morphic Holding will offset losses from the drop in Morphic Holding's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
| Morphic Holding vs. Arcellx | Morphic Holding vs. Ventyx Biosciences | Morphic Holding vs. Immunocore Holdings | Morphic Holding vs. Vaxcyte |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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