Correlation Between Innovent Biologics and Merus BV

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

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

Diversification Opportunities for Innovent Biologics and Merus BV

0.77

Correlation Coefficient

Innovent Biologics  Merus BV

Poor diversification

The 3 months correlation between Innovent and Merus is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Innovent Biologics and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Innovent Biologics 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 Innovent Biologics 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 Innovent Biologics i.e., Innovent Biologics and Merus BV go up and down completely randomly.

Pair Corralation between Innovent Biologics and Merus BV

Assuming the 90 days horizon Innovent Biologics is expected to generate 1.56 times more return on investment than Merus BV. However, Innovent Biologics is 1.56 times more volatile than Merus BV. It trades about 0.1 of its potential returns per unit of risk. Merus BV is currently generating about 0.05 per unit of risk. If you would invest  475.00  in Innovent Biologics on December 29, 2024 and sell it today you would earn a total of  115.00  from holding Innovent Biologics or generate 24.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Innovent Biologics  vs.  Merus BV

Innovent Biologics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovent Biologics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Innovent Biologics reported solid returns over the last few months and may actually be approaching a breakup point.

Merus BV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merus BV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Merus BV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Innovent Biologics and Merus BV

The main advantage of trading using opposite Innovent Biologics and Merus BV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovent Biologics 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 Innovent Biologics 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.