Correlation Between Merus BV and Larimar Therapeutics
Can any of the company-specific risk be diversified away by investing in both Merus BV and Larimar Therapeutics 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 Merus BV and Larimar Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merus BV and Larimar Therapeutics, you can compare the effects of market volatilities on Merus BV and Larimar Therapeutics 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 Merus BV with a short position of Larimar Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merus BV and Larimar Therapeutics.
Diversification Opportunities for Merus BV and Larimar Therapeutics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merus and Larimar is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Merus BV and Larimar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larimar Therapeutics and Merus BV 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 Merus BV are associated (or correlated) with Larimar Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larimar Therapeutics has no effect on the direction of Merus BV i.e., Merus BV and Larimar Therapeutics go up and down completely randomly.
Pair Corralation between Merus BV and Larimar Therapeutics
Given the investment horizon of 90 days Merus BV is expected to generate 0.39 times more return on investment than Larimar Therapeutics. However, Merus BV is 2.59 times less risky than Larimar Therapeutics. It trades about -0.23 of its potential returns per unit of risk. Larimar Therapeutics is currently generating about -0.09 per unit of risk. If you would invest 5,231 in Merus BV on August 24, 2024 and sell it today you would lose (682.00) from holding Merus BV or give up 13.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merus BV vs. Larimar Therapeutics
Performance |
| Timeline |
| Merus BV |
| Larimar Therapeutics |
Merus BV and Larimar Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merus BV and Larimar Therapeutics
The main advantage of trading using opposite Merus BV and Larimar Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merus BV position performs unexpectedly, Larimar Therapeutics 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 Larimar Therapeutics will offset losses from the drop in Larimar Therapeutics' long position.| Merus BV vs. Anebulo Pharmaceuticals | Merus BV vs. Adagene | Merus BV vs. Acrivon Therapeutics, Common | Merus BV vs. AnaptysBio |
| Larimar Therapeutics vs. Vaxcyte | Larimar Therapeutics vs. Syndax Pharmaceuticals | Larimar Therapeutics vs. Merus BV | Larimar Therapeutics vs. Sutro Biopharma |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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