Correlation Between Merck and Revolution Medicines
Can any of the company-specific risk be diversified away by investing in both Merck and Revolution Medicines 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 Revolution Medicines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Revolution Medicines, you can compare the effects of market volatilities on Merck and Revolution Medicines 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 Revolution Medicines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Revolution Medicines.
Diversification Opportunities for Merck and Revolution Medicines
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Revolution is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Revolution Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Medicines 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 Revolution Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Medicines has no effect on the direction of Merck i.e., Merck and Revolution Medicines go up and down completely randomly.
Pair Corralation between Merck and Revolution Medicines
Considering the 90-day investment horizon Merck is expected to generate 165.27 times less return on investment than Revolution Medicines. But when comparing it to its historical volatility, Merck Company is 3.01 times less risky than Revolution Medicines. It trades about 0.0 of its potential returns per unit of risk. Revolution Medicines is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,415 in Revolution Medicines on August 28, 2024 and sell it today you would earn a total of 3,335 from holding Revolution Medicines or generate 138.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Revolution Medicines
Performance |
| Timeline |
| Merck Company |
| Revolution Medicines |
Merck and Revolution Medicines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Revolution Medicines
The main advantage of trading using opposite Merck and Revolution Medicines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Revolution Medicines 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 Revolution Medicines will offset losses from the drop in Revolution Medicines' long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Revolution Medicines vs. Blueprint Medicines Corp | Revolution Medicines vs. Sana Biotechnology | Revolution Medicines vs. Kymera Therapeutics | Revolution Medicines vs. Monte Rosa Therapeutics |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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