Correlation Between ACERUS PHARMACEUTICALS and Merck Kgaa

By analyzing existing cross correlation between ACERUS PHARMACEUTICALS CORP 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.

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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.

Diversification Opportunities for ACERUS PHARMACEUTICALS and Merck Kgaa

-0.24
  Correlation Coefficient
ACERUS PHARMACEUTICALS
Merck Kgaa ADR

Very good diversification

The 3 months correlation between ACERUS and Merck is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ACERUS PHARMACEUTICALS CORP 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 CORP 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

Assuming the 90 days horizon ACERUS PHARMACEUTICALS CORP is expected to generate 6.46 times more return on investment than Merck Kgaa. However, ACERUS PHARMACEUTICALS is 6.46 times more volatile than Merck Kgaa ADR. It trades about 0.06 of its potential returns per unit of risk. Merck Kgaa ADR is currently generating about 0.14 per unit of risk. If you would invest  3.00  in ACERUS PHARMACEUTICALS CORP on July 25, 2021 and sell it today you would earn a total of  0.00  from holding ACERUS PHARMACEUTICALS CORP or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.46%
ValuesDaily Returns

ACERUS PHARMACEUTICALS CORP  vs.  Merck Kgaa ADR

 Performance (%) 
      Timeline 
ACERUS PHARMACEUTICALS 
 ACERUS Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ACERUS PHARMACEUTICALS CORP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, ACERUS PHARMACEUTICALS exhibited solid returns over the last few months and may actually be approaching a breakup point.

ACERUS Price Channel

Merck Kgaa ADR 
 Merck Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Kgaa ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Merck Kgaa showed solid returns over the last few months and may actually be approaching a breakup point.

Merck Price Channel

ACERUS PHARMACEUTICALS and Merck Kgaa Volatility Contrast

 Predicted Return Density 
      Returns 

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.

ACERUS PHARMACEUTICALS CORP

Pair trading matchups for ACERUS PHARMACEUTICALS

The idea behind ACERUS PHARMACEUTICALS CORP 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.

Merck Kgaa ADR

Pair trading matchups for Merck Kgaa

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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