Correlation Between Fate Therapeutics and Merus BV

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

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

Diversification Opportunities for Fate Therapeutics and Merus BV

0.52

Correlation Coefficient

Fate Therapeutics  Merus BV

Very weak diversification

The 3 months correlation between Fate and Merus is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Fate Therapeutics 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 Fate Therapeutics 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 Fate Therapeutics i.e., Fate Therapeutics and Merus BV go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Merus BV

Given the investment horizon of 90 days Fate Therapeutics is expected to under-perform the Merus BV. In addition to that, Fate Therapeutics is 2.71 times more volatile than Merus BV. It trades about -0.13 of its total potential returns per unit of risk. Merus BV is currently generating about -0.11 per unit of volatility. If you would invest  4,549  in Merus BV on September 23, 2024 and sell it today you would lose (364.00) from holding Merus BV or give up 8.0% of portfolio value over 90 days.

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

Fate Therapeutics  vs.  Merus BV

Fate Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fate Therapeutics 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Merus BV

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Fate Therapeutics and Merus BV

The main advantage of trading using opposite Fate Therapeutics and Merus BV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fate Therapeutics 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 Fate Therapeutics 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.