Correlation Between Merrimack Pharmaceuticals and First Trust
Can any of the company-specific risk be diversified away by investing in both Merrimack Pharmaceuticals and First Trust 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 Merrimack Pharmaceuticals and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merrimack Pharmaceuticals and First Trust Japan, you can compare the effects of market volatilities on Merrimack Pharmaceuticals and First Trust 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 Merrimack Pharmaceuticals with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merrimack Pharmaceuticals and First Trust.
Diversification Opportunities for Merrimack Pharmaceuticals and First Trust
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merrimack and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Merrimack Pharmaceuticals and First Trust Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Japan and Merrimack Pharmaceuticals 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 Merrimack Pharmaceuticals are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Japan has no effect on the direction of Merrimack Pharmaceuticals i.e., Merrimack Pharmaceuticals and First Trust go up and down completely randomly.
Pair Corralation between Merrimack Pharmaceuticals and First Trust
Given the investment horizon of 90 days Merrimack Pharmaceuticals is expected to generate 1.19 times more return on investment than First Trust. However, Merrimack Pharmaceuticals is 1.19 times more volatile than First Trust Japan. It trades about 0.15 of its potential returns per unit of risk. First Trust Japan is currently generating about 0.06 per unit of risk. If you would invest 1,325 in Merrimack Pharmaceuticals on January 26, 2024 and sell it today you would earn a total of 146.00 from holding Merrimack Pharmaceuticals or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merrimack Pharmaceuticals vs. First Trust Japan
Performance |
| Timeline |
| Merrimack Pharmaceuticals |
| First Trust Japan |
Merrimack Pharmaceuticals and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merrimack Pharmaceuticals and First Trust
The main advantage of trading using opposite Merrimack Pharmaceuticals and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merrimack Pharmaceuticals position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Merrimack Pharmaceuticals vs. Amicus Therapeutics | Merrimack Pharmaceuticals vs. Celldex Therapeutics | Merrimack Pharmaceuticals vs. Puma Biotechnology | Merrimack Pharmaceuticals vs. Agios Pharm |
| First Trust vs. WisdomTree Europe Hedged | First Trust vs. WisdomTree Europe SmallCap | First Trust vs. iShares MSCI Germany |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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