Correlation Between Merck and Terns Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Merck and Terns Pharmaceuticals 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 Terns Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Terns Pharmaceuticals, you can compare the effects of market volatilities on Merck and Terns Pharmaceuticals 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 Terns Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Terns Pharmaceuticals.
Diversification Opportunities for Merck and Terns Pharmaceuticals
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Terns is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Merck i.e., Merck and Terns Pharmaceuticals go up and down completely randomly.
Pair Corralation between Merck and Terns Pharmaceuticals
Considering the 90-day investment horizon Merck Company is expected to under-perform the Terns Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 4.3 times less risky than Terns Pharmaceuticals. The stock trades about 0.0 of its potential returns per unit of risk. The Terns Pharmaceuticals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 609.00 in Terns Pharmaceuticals on August 26, 2024 and sell it today you would lose (30.00) from holding Terns Pharmaceuticals or give up 4.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Terns Pharmaceuticals
Performance |
| Timeline |
| Merck Company |
| Terns Pharmaceuticals |
Merck and Terns Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Terns Pharmaceuticals
The main advantage of trading using opposite Merck and Terns Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Terns Pharmaceuticals 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 Terns Pharmaceuticals will offset losses from the drop in Terns Pharmaceuticals' long position.| Merck vs. Capricor Therapeutics | Merck vs. Akari Therapeutics PLC | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings |
| Terns Pharmaceuticals vs. Capricor Therapeutics | Terns Pharmaceuticals vs. Akari Therapeutics PLC | Terns Pharmaceuticals vs. Soleno Therapeutics | Terns Pharmaceuticals vs. Bio Path Holdings |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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