Correlation Between Ikena Oncology and Merck

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

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

Diversification Opportunities for Ikena Oncology and Merck

-0.34

Correlation Coefficient

Ikena Oncology  Merck

Very good diversification

The 3 months correlation between Ikena and Merck is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ikena Oncology and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Ikena Oncology 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 Ikena Oncology 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 Ikena Oncology i.e., Ikena Oncology and Merck go up and down completely randomly.

Pair Corralation between Ikena Oncology and Merck

Given the investment horizon of 90 days Ikena Oncology is expected to generate 4.64 times more return on investment than Merck. However, Ikena Oncology is 4.64 times more volatile than Merck Company. It trades about 0.02 of its potential returns per unit of risk. Merck Company is currently generating about 0.0 per unit of risk. If you would invest  274.00  in Ikena Oncology on September 4, 2024 and sell it today you would lose (103.00) from holding Ikena Oncology or give up 37.59% of portfolio value over 90 days.

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

Ikena Oncology  vs.  Merck Company

Ikena Oncology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ikena Oncology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ikena Oncology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company 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 basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ikena Oncology and Merck

The main advantage of trading using opposite Ikena Oncology and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ikena Oncology 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 Ikena Oncology 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.