Correlation Between Merck and UroGen Pharma
Can any of the company-specific risk be diversified away by investing in both Merck and UroGen Pharma 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 UroGen Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and UroGen Pharma, you can compare the effects of market volatilities on Merck and UroGen Pharma 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 UroGen Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and UroGen Pharma.
Diversification Opportunities for Merck and UroGen Pharma
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and UroGen is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and UroGen Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UroGen Pharma 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 UroGen Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UroGen Pharma has no effect on the direction of Merck i.e., Merck and UroGen Pharma go up and down completely randomly.
Pair Corralation between Merck and UroGen Pharma
Considering the 90-day investment horizon Merck Company is expected to generate 0.82 times more return on investment than UroGen Pharma. However, Merck Company is 1.21 times less risky than UroGen Pharma. It trades about -0.12 of its potential returns per unit of risk. UroGen Pharma is currently generating about -0.14 per unit of risk. If you would invest 9,794 in Merck Company on November 28, 2024 and sell it today you would lose (651.00) from holding Merck Company or give up 6.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. UroGen Pharma
Performance |
| Timeline |
| Merck Company |
| UroGen Pharma |
Merck and UroGen Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and UroGen Pharma
The main advantage of trading using opposite Merck and UroGen Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, UroGen Pharma 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 UroGen Pharma will offset losses from the drop in UroGen Pharma's long position.The idea behind Merck Company and UroGen Pharma 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.| UroGen Pharma vs. Inhibrx | UroGen Pharma vs. Celcuity LLC | UroGen Pharma vs. Enliven Therapeutics | UroGen Pharma vs. Ikena Oncology |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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