Correlation Between Mersana Therapeutics and Revolution Medicines
Can any of the company-specific risk be diversified away by investing in both Mersana Therapeutics and Revolution Medicines 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 Mersana Therapeutics and Revolution Medicines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mersana Therapeutics and Revolution Medicines, you can compare the effects of market volatilities on Mersana Therapeutics and Revolution Medicines 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 Mersana Therapeutics with a short position of Revolution Medicines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mersana Therapeutics and Revolution Medicines.
Diversification Opportunities for Mersana Therapeutics and Revolution Medicines
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mersana and Revolution is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Mersana Therapeutics and Revolution Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Medicines and Mersana Therapeutics 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 Mersana Therapeutics are associated (or correlated) with Revolution Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Medicines has no effect on the direction of Mersana Therapeutics i.e., Mersana Therapeutics and Revolution Medicines go up and down completely randomly.
Pair Corralation between Mersana Therapeutics and Revolution Medicines
Given the investment horizon of 90 days Mersana Therapeutics is expected to generate 2.48 times less return on investment than Revolution Medicines. In addition to that, Mersana Therapeutics is 1.94 times more volatile than Revolution Medicines. It trades about 0.01 of its total potential returns per unit of risk. Revolution Medicines is currently generating about 0.06 per unit of volatility. If you would invest 2,432 in Revolution Medicines on August 24, 2024 and sell it today you would earn a total of 3,243 from holding Revolution Medicines or generate 133.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mersana Therapeutics vs. Revolution Medicines
Performance |
| Timeline |
| Mersana Therapeutics |
| Revolution Medicines |
Mersana Therapeutics and Revolution Medicines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mersana Therapeutics and Revolution Medicines
The main advantage of trading using opposite Mersana Therapeutics and Revolution Medicines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mersana Therapeutics position performs unexpectedly, Revolution Medicines 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 Revolution Medicines will offset losses from the drop in Revolution Medicines' long position.| Mersana Therapeutics vs. Terns Pharmaceuticals | Mersana Therapeutics vs. Amylyx Pharmaceuticals | Mersana Therapeutics vs. Acumen Pharmaceuticals | Mersana Therapeutics vs. Inozyme Pharma |
| Revolution Medicines vs. Lyra Therapeutics | Revolution Medicines vs. Hookipa Pharma | Revolution Medicines vs. Cingulate Warrants | Revolution Medicines vs. SAB Biotherapeutics |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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