Correlation Between Acerus Pharmaceuticals and Merck KGaA

Can any of the company-specific risk be diversified away by investing in both Acerus Pharmaceuticals and Merck KGaA 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 Acerus Pharmaceuticals and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acerus Pharmaceuticals and Merck KGaA ADR, you can compare the effects of market volatilities on Acerus Pharmaceuticals and Merck KGaA 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 Acerus Pharmaceuticals with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acerus Pharmaceuticals and Merck KGaA.

Diversification Opportunities for Acerus Pharmaceuticals and Merck KGaA

-0.47

Correlation Coefficient

Acerus Pharmaceuticals  Merck KGaA

Very good diversification

The 3 months correlation between Acerus and Merck is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Acerus Pharmaceuticals and Merck KGaA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA ADR and Acerus 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 Acerus Pharmaceuticals are associated (or correlated) with Merck KGaA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck KGaA ADR has no effect on the direction of Acerus Pharmaceuticals i.e., Acerus Pharmaceuticals and Merck KGaA go up and down completely randomly.

Pair Corralation between Acerus Pharmaceuticals and Merck KGaA

If you would invest  22.00  in Acerus Pharmaceuticals on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Acerus Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Acerus Pharmaceuticals  vs.  Merck KGaA ADR

Acerus Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acerus Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Acerus Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Merck KGaA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck KGaA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Merck KGaA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Acerus Pharmaceuticals and Merck KGaA

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

The idea behind Acerus Pharmaceuticals and Merck KGaA ADR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.