Correlation Between Gracell Biotechnologies and Merus BV

Can any of the company-specific risk be diversified away by investing in both Gracell Biotechnologies and Merus BV 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 Gracell Biotechnologies and Merus BV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gracell Biotechnologies and Merus BV, you can compare the effects of market volatilities on Gracell Biotechnologies and Merus BV 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 Gracell Biotechnologies with a short position of Merus BV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gracell Biotechnologies and Merus BV.

Diversification Opportunities for Gracell Biotechnologies and Merus BV

0.13

Correlation Coefficient

Gracell Biotechnologies  Merus BV

Average diversification

The 3 months correlation between Gracell and Merus is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Gracell Biotechnologies and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Gracell Biotechnologies 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 Gracell Biotechnologies are associated (or correlated) with Merus BV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merus BV has no effect on the direction of Gracell Biotechnologies i.e., Gracell Biotechnologies and Merus BV go up and down completely randomly.

Pair Corralation between Gracell Biotechnologies and Merus BV

Given the investment horizon of 90 days Gracell Biotechnologies is expected to generate 8.68 times less return on investment than Merus BV. In addition to that, Gracell Biotechnologies is 4.38 times more volatile than Merus BV. It trades about 0.01 of its total potential returns per unit of risk. Merus BV is currently generating about 0.19 per unit of volatility. If you would invest  2,401  in Merus BV on February 4, 2024 and sell it today you would earn a total of  2,435  from holding Merus BV or generate 101.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	60.0%
Values	Daily Returns

Gracell Biotechnologies  vs.  Merus BV

Gracell Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gracell Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Merus BV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Merus BV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Merus BV unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gracell Biotechnologies and Merus BV

The main advantage of trading using opposite Gracell Biotechnologies and Merus BV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gracell Biotechnologies position performs unexpectedly, Merus BV 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 Merus BV will offset losses from the drop in Merus BV's long position.

The idea behind Gracell Biotechnologies and Merus BV 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.