Correlation Between Merck and Hookipa Pharma

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

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

Diversification Opportunities for Merck and Hookipa Pharma

0.28

Correlation Coefficient

Merck  Hookipa Pharma

Modest diversification

The 3 months correlation between Merck and Hookipa is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Hookipa Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hookipa Pharma 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 Hookipa Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hookipa Pharma has no effect on the direction of Merck i.e., Merck and Hookipa Pharma go up and down completely randomly.

Pair Corralation between Merck and Hookipa Pharma

Considering the 90-day investment horizon Merck Company is expected to generate 0.36 times more return on investment than Hookipa Pharma. However, Merck Company is 2.78 times less risky than Hookipa Pharma. It trades about -0.08 of its potential returns per unit of risk. Hookipa Pharma is currently generating about -0.15 per unit of risk. If you would invest  9,753  in Merck Company on December 28, 2024 and sell it today you would lose (942.00) from holding Merck Company or give up 9.66% of portfolio value over 90 days.

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

Merck Company  vs.  Hookipa Pharma

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Hookipa Pharma

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Merck and Hookipa Pharma

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

The idea behind Merck Company and Hookipa Pharma 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.