Correlation Between Merrimack Pharmaceuticals and NextCure

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

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

Diversification Opportunities for Merrimack Pharmaceuticals and NextCure

0.72

Correlation Coefficient

Merrimack Pharmaceuticals  NextCure

Poor diversification

The 3 months correlation between Merrimack and NextCure is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merrimack Pharmaceuticals and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Merrimack 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 Merrimack Pharmaceuticals are associated (or correlated) with NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Merrimack Pharmaceuticals i.e., Merrimack Pharmaceuticals and NextCure go up and down completely randomly.

Pair Corralation between Merrimack Pharmaceuticals and NextCure

If you would invest  1,196  in Merrimack Pharmaceuticals on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Merrimack Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Merrimack Pharmaceuticals  vs.  NextCure

Merrimack Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrimack Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Merrimack Pharmaceuticals is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

NextCure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextCure 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.

Pair Trading with Merrimack Pharmaceuticals and NextCure

The main advantage of trading using opposite Merrimack Pharmaceuticals and NextCure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merrimack Pharmaceuticals position performs unexpectedly, NextCure 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 NextCure will offset losses from the drop in NextCure's long position.

The idea behind Merrimack Pharmaceuticals and NextCure 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.