Correlation Between Gossamer Bio and Merck

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

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

Diversification Opportunities for Gossamer Bio and Merck

0.18

Correlation Coefficient

Gossamer Bio  Merck

Average diversification

The 3 months correlation between Gossamer and Merck is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gossamer Bio and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Gossamer Bio 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 Gossamer Bio are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Gossamer Bio i.e., Gossamer Bio and Merck go up and down completely randomly.

Pair Corralation between Gossamer Bio and Merck

Given the investment horizon of 90 days Gossamer Bio is expected to under-perform the Merck. In addition to that, Gossamer Bio is 3.21 times more volatile than Merck Company. It trades about -0.57 of its total potential returns per unit of risk. Merck Company is currently generating about 0.05 per unit of volatility. If you would invest  12,385  in Merck Company on January 20, 2024 and sell it today you would earn a total of  138.00  from holding Merck Company or generate 1.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gossamer Bio  vs.  Merck Company

Gossamer Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gossamer Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gossamer Bio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Merck Company

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gossamer Bio and Merck

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

The idea behind Gossamer Bio and Merck Company 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.