Correlation Between Merrimack Pharmaceuticals and Zenith Capital

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

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

Diversification Opportunities for Merrimack Pharmaceuticals and Zenith Capital

0.75

Correlation Coefficient

Merrimack Pharmaceuticals  Zenith Capital

Poor diversification

The 3 months correlation between Merrimack and Zenith is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merrimack Pharmaceuticals and Zenith Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zenith Capital Corp 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 Zenith Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zenith Capital Corp has no effect on the direction of Merrimack Pharmaceuticals i.e., Merrimack Pharmaceuticals and Zenith Capital go up and down completely randomly.

Pair Corralation between Merrimack Pharmaceuticals and Zenith Capital

If you would invest  8.00  in Zenith Capital Corp on October 26, 2024 and sell it today you would lose (7.99) from holding Zenith Capital Corp or give up 99.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.61%
Values	Daily Returns

Merrimack Pharmaceuticals  vs.  Zenith Capital Corp

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.

Zenith Capital Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zenith Capital Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Zenith Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merrimack Pharmaceuticals and Zenith Capital

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

The idea behind Merrimack Pharmaceuticals and Zenith Capital Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.