Correlation Between Merck and Regulus Therapeutics
Can any of the company-specific risk be diversified away by investing in both Merck and Regulus Therapeutics 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 Regulus Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Regulus Therapeutics, you can compare the effects of market volatilities on Merck and Regulus Therapeutics 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 Regulus Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Regulus Therapeutics.
Diversification Opportunities for Merck and Regulus Therapeutics
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Regulus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Regulus Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regulus 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 Regulus Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regulus Therapeutics has no effect on the direction of Merck i.e., Merck and Regulus Therapeutics go up and down completely randomly.
Pair Corralation between Merck and Regulus Therapeutics
Considering the 90-day investment horizon Merck Company is expected to under-perform the Regulus Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.8 times less risky than Regulus Therapeutics. The stock trades about 0.0 of its potential returns per unit of risk. The Regulus Therapeutics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 149.00 in Regulus Therapeutics on September 2, 2024 and sell it today you would earn a total of 12.00 from holding Regulus Therapeutics or generate 8.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Regulus Therapeutics
Performance |
| Timeline |
| Merck Company |
| Regulus Therapeutics |
Merck and Regulus Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Regulus Therapeutics
The main advantage of trading using opposite Merck and Regulus Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Regulus Therapeutics 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 Regulus Therapeutics will offset losses from the drop in Regulus Therapeutics' long position.The idea behind Merck Company and Regulus Therapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Regulus Therapeutics vs. Tenax Therapeutics | Regulus Therapeutics vs. Verastem | Regulus Therapeutics vs. Pulmatrix | Regulus Therapeutics vs. Cellectar Biosciences |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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