Correlation Between Arrowhead Pharmaceuticals and Merus BV

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

Diversification Opportunities for Arrowhead Pharmaceuticals and Merus BV

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Arrowhead and Merus is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Arrowhead Pharmaceuticals and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Arrowhead 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 Arrowhead Pharmaceuticals are associated (or correlated) with Merus BV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merus BV has no effect on the direction of Arrowhead Pharmaceuticals i.e., Arrowhead Pharmaceuticals and Merus BV go up and down completely randomly.

Pair Corralation between Arrowhead Pharmaceuticals and Merus BV

Given the investment horizon of 90 days Arrowhead Pharmaceuticals is expected to generate 10.69 times less return on investment than Merus BV. In addition to that, Arrowhead Pharmaceuticals is 1.09 times more volatile than Merus BV. It trades about 0.01 of its total potential returns per unit of risk. Merus BV is currently generating about 0.06 per unit of volatility. If you would invest  2,028  in Merus BV on October 5, 2024 and sell it today you would earn a total of  2,202  from holding Merus BV or generate 108.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Arrowhead Pharmaceuticals  vs.  Merus BV

 Performance 
       Timeline  
Arrowhead Pharmaceuticals 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Arrowhead Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Arrowhead Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.
Merus BV 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Merus BV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Arrowhead Pharmaceuticals and Merus BV Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arrowhead Pharmaceuticals and Merus BV

The main advantage of trading using opposite Arrowhead Pharmaceuticals and Merus BV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrowhead Pharmaceuticals position performs unexpectedly, Merus BV 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 Merus BV will offset losses from the drop in Merus BV's long position.
The idea behind Arrowhead Pharmaceuticals and Merus BV 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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