Correlation Between Merck and InflaRx NV

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

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

Diversification Opportunities for Merck and InflaRx NV

0.28

Correlation Coefficient

Merck  InflaRx NV

Modest diversification

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

Pair Corralation between Merck and InflaRx NV

Considering the 90-day investment horizon Merck Company is expected to generate 0.3 times more return on investment than InflaRx NV. However, Merck Company is 3.31 times less risky than InflaRx NV. It trades about -0.03 of its potential returns per unit of risk. InflaRx NV is currently generating about -0.14 per unit of risk. If you would invest  9,867  in Merck Company on December 19, 2024 and sell it today you would lose (395.00) from holding Merck Company or give up 4.0% 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.  InflaRx NV

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 quite persistent basic indicators, Merck is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

InflaRx NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days InflaRx NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Merck and InflaRx NV

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

The idea behind Merck Company and InflaRx NV 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..