Correlation Between Merck and Soleno Therapeutics
Can any of the company-specific risk be diversified away by investing in both Merck and Soleno 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 Soleno 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 Soleno Therapeutics, you can compare the effects of market volatilities on Merck and Soleno 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 Soleno Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Soleno Therapeutics.
Diversification Opportunities for Merck and Soleno Therapeutics
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Soleno is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Soleno Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soleno 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 Soleno Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soleno Therapeutics has no effect on the direction of Merck i.e., Merck and Soleno Therapeutics go up and down completely randomly.
Pair Corralation between Merck and Soleno Therapeutics
Considering the 90-day investment horizon Merck is expected to generate 79.61 times less return on investment than Soleno Therapeutics. But when comparing it to its historical volatility, Merck Company is 2.92 times less risky than Soleno Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Soleno Therapeutics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,315 in Soleno Therapeutics on August 25, 2024 and sell it today you would earn a total of 3,463 from holding Soleno Therapeutics or generate 149.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Soleno Therapeutics
Performance |
| Timeline |
| Merck Company |
| Soleno Therapeutics |
Merck and Soleno Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Soleno Therapeutics
The main advantage of trading using opposite Merck and Soleno Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Soleno 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 Soleno Therapeutics will offset losses from the drop in Soleno Therapeutics' long position.| Merck vs. Capricor Therapeutics | Merck vs. Akari Therapeutics PLC | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings |
| Soleno Therapeutics vs. Eliem Therapeutics | Soleno Therapeutics vs. HCW Biologics | Soleno Therapeutics vs. RenovoRx | Soleno Therapeutics vs. Tempest 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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