Correlation Between Merus BV and Mustang Bio
Can any of the company-specific risk be diversified away by investing in both Merus BV and Mustang Bio 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 Mustang Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merus BV and Mustang Bio, you can compare the effects of market volatilities on Merus BV and Mustang Bio 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 Mustang Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merus BV and Mustang Bio.
Diversification Opportunities for Merus BV and Mustang Bio
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merus and Mustang is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merus BV and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang Bio 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 Mustang Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustang Bio has no effect on the direction of Merus BV i.e., Merus BV and Mustang Bio go up and down completely randomly.
Pair Corralation between Merus BV and Mustang Bio
Given the investment horizon of 90 days Merus BV is expected to under-perform the Mustang Bio. But the stock apears to be less risky and, when comparing its historical volatility, Merus BV is 2.38 times less risky than Mustang Bio. The stock trades about -0.06 of its potential returns per unit of risk. The Mustang Bio is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Mustang Bio on October 9, 2024 and sell it today you would earn a total of 2.00 from holding Mustang Bio or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merus BV vs. Mustang Bio
Performance |
| Timeline |
| Merus BV |
| Mustang Bio |
Merus BV and Mustang Bio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merus BV and Mustang Bio
The main advantage of trading using opposite Merus BV and Mustang Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merus BV position performs unexpectedly, Mustang Bio 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 Mustang Bio will offset losses from the drop in Mustang Bio's long position.| Merus BV vs. Anebulo Pharmaceuticals | Merus BV vs. Adagene | Merus BV vs. Acrivon Therapeutics, Common | Merus BV vs. AnaptysBio |
| Mustang Bio vs. Checkpoint Therapeutics | Mustang Bio vs. Reviva Pharmaceuticals Holdings | Mustang Bio vs. Fortress Biotech Pref | Mustang Bio vs. Kodiak Sciences |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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