Correlation Between Merck and COSCIENS Biopharma

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

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

Diversification Opportunities for Merck and COSCIENS Biopharma

0.81

Correlation Coefficient

Merck  COSCIENS Biopharma

Very poor diversification

The 3 months correlation between Merck and COSCIENS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and COSCIENS Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCIENS Biopharma and Merck 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 Merck Company are associated (or correlated) with COSCIENS Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCIENS Biopharma has no effect on the direction of Merck i.e., Merck and COSCIENS Biopharma go up and down completely randomly.

Pair Corralation between Merck and COSCIENS Biopharma

Considering the 90-day investment horizon Merck Company is expected to generate 0.38 times more return on investment than COSCIENS Biopharma. However, Merck Company is 2.61 times less risky than COSCIENS Biopharma. It trades about -0.21 of its potential returns per unit of risk. COSCIENS Biopharma is currently generating about -0.17 per unit of risk. If you would invest  11,770  in Merck Company on September 18, 2024 and sell it today you would lose (1,764) from holding Merck Company or give up 14.99% of portfolio value over 90 days.

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

Merck Company  vs.  COSCIENS Biopharma

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

COSCIENS Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COSCIENS Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Merck and COSCIENS Biopharma

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

The idea behind Merck Company and COSCIENS Biopharma 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.