Correlation Between Merck and Theriva Biologics
Can any of the company-specific risk be diversified away by investing in both Merck and Theriva Biologics 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 Theriva Biologics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Theriva Biologics, you can compare the effects of market volatilities on Merck and Theriva Biologics 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 Theriva Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Theriva Biologics.
Diversification Opportunities for Merck and Theriva Biologics
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merck and Theriva is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Theriva Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theriva Biologics 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 Theriva Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theriva Biologics has no effect on the direction of Merck i.e., Merck and Theriva Biologics go up and down completely randomly.
Pair Corralation between Merck and Theriva Biologics
Considering the 90-day investment horizon Merck Company is expected to generate 0.18 times more return on investment than Theriva Biologics. However, Merck Company is 5.47 times less risky than Theriva Biologics. It trades about -0.04 of its potential returns per unit of risk. Theriva Biologics is currently generating about -0.04 per unit of risk. If you would invest 10,823 in Merck Company on January 10, 2025 and sell it today you would lose (2,632) from holding Merck Company or give up 24.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Merck Company vs. Theriva Biologics
Performance |
| Timeline |
| Merck Company |
| Theriva Biologics |
Merck and Theriva Biologics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Theriva Biologics
The main advantage of trading using opposite Merck and Theriva Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Theriva Biologics 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 Theriva Biologics will offset losses from the drop in Theriva Biologics' long position.The idea behind Merck Company and Theriva Biologics 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.| Theriva Biologics vs. Avalo Therapeutics | Theriva Biologics vs. Virpax Pharmaceuticals | Theriva Biologics vs. Revelation Biosciences | Theriva Biologics vs. Biodexa Pharmaceticals |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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