Correlation Between Merck and Vericel Corp
Can any of the company-specific risk be diversified away by investing in both Merck and Vericel Corp 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 Vericel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Vericel Corp Ord, you can compare the effects of market volatilities on Merck and Vericel Corp 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 Vericel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Vericel Corp.
Diversification Opportunities for Merck and Vericel Corp
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Vericel is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Vericel Corp Ord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vericel Corp Ord 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 Vericel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vericel Corp Ord has no effect on the direction of Merck i.e., Merck and Vericel Corp go up and down completely randomly.
Pair Corralation between Merck and Vericel Corp
Considering the 90-day investment horizon Merck Company is expected to under-perform the Vericel Corp. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.77 times less risky than Vericel Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Vericel Corp Ord is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,920 in Vericel Corp Ord on November 9, 2024 and sell it today you would earn a total of 2,050 from holding Vericel Corp Ord or generate 52.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Vericel Corp Ord
Performance |
| Timeline |
| Merck Company |
| Vericel Corp Ord |
Merck and Vericel Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Vericel Corp
The main advantage of trading using opposite Merck and Vericel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Vericel Corp 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 Vericel Corp will offset losses from the drop in Vericel Corp's long position.The idea behind Merck Company and Vericel Corp Ord 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.| Vericel Corp vs. Collplant Biotechnologies | Vericel Corp vs. Keros Therapeutics | Vericel Corp vs. Merus BV | Vericel Corp vs. Century 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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