Correlation Between RenovoRx and Merck

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Can any of the company-specific risk be diversified away by investing in both RenovoRx 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 RenovoRx and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RenovoRx and Merck Company, you can compare the effects of market volatilities on RenovoRx 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 RenovoRx with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of RenovoRx and Merck.

Diversification Opportunities for RenovoRx and Merck

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between RenovoRx and Merck is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding RenovoRx and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and RenovoRx 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 RenovoRx 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 RenovoRx i.e., RenovoRx and Merck go up and down completely randomly.

Pair Corralation between RenovoRx and Merck

Given the investment horizon of 90 days RenovoRx is expected to generate 3.53 times more return on investment than Merck. However, RenovoRx is 3.53 times more volatile than Merck Company. It trades about 0.11 of its potential returns per unit of risk. Merck Company is currently generating about -0.17 per unit of risk. If you would invest  102.00  in RenovoRx on September 4, 2024 and sell it today you would earn a total of  18.00  from holding RenovoRx or generate 17.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

RenovoRx  vs.  Merck Company

 Performance 
       Timeline  
RenovoRx 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in RenovoRx are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, RenovoRx unveiled solid returns over the last few months and may actually be approaching a breakup point.
Merck Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

RenovoRx and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RenovoRx and Merck

The main advantage of trading using opposite RenovoRx and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RenovoRx 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 RenovoRx 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.
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 the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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