Correlation Between Merck and Sangamo Therapeutics
Can any of the company-specific risk be diversified away by investing in both Merck and Sangamo 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 Sangamo 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 Sangamo Therapeutics, you can compare the effects of market volatilities on Merck and Sangamo 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 Sangamo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Sangamo Therapeutics.
Diversification Opportunities for Merck and Sangamo Therapeutics
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Sangamo is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Sangamo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sangamo 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 Sangamo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sangamo Therapeutics has no effect on the direction of Merck i.e., Merck and Sangamo Therapeutics go up and down completely randomly.
Pair Corralation between Merck and Sangamo Therapeutics
Considering the 90-day investment horizon Merck Company is expected to under-perform the Sangamo Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 6.95 times less risky than Sangamo Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Sangamo Therapeutics is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 62.00 in Sangamo Therapeutics on August 24, 2024 and sell it today you would earn a total of 134.00 from holding Sangamo Therapeutics or generate 216.13% 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. Sangamo Therapeutics
Performance |
| Timeline |
| Merck Company |
| Sangamo Therapeutics |
Merck and Sangamo Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Sangamo Therapeutics
The main advantage of trading using opposite Merck and Sangamo Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Sangamo 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 Sangamo Therapeutics will offset losses from the drop in Sangamo Therapeutics' long position.| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
| Sangamo Therapeutics vs. Editas Medicine | Sangamo Therapeutics vs. Intellia Therapeutics | Sangamo Therapeutics vs. Bluebird bio | Sangamo Therapeutics vs. Alnylam 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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