Correlation Between Merus BV and IGM Biosciences

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

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

Diversification Opportunities for Merus BV and IGM Biosciences

0.69

Correlation Coefficient

Merus BV  IGM Biosciences

Poor diversification

The 3 months correlation between Merus and IGM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merus BV and IGM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Biosciences and Merus BV 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 Merus BV are associated (or correlated) with IGM Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Biosciences has no effect on the direction of Merus BV i.e., Merus BV and IGM Biosciences go up and down completely randomly.

Pair Corralation between Merus BV and IGM Biosciences

Given the investment horizon of 90 days Merus BV is expected to generate 0.54 times more return on investment than IGM Biosciences. However, Merus BV is 1.84 times less risky than IGM Biosciences. It trades about 0.08 of its potential returns per unit of risk. IGM Biosciences is currently generating about 0.01 per unit of risk. If you would invest  1,467  in Merus BV on September 13, 2024 and sell it today you would earn a total of  2,852  from holding Merus BV or generate 194.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Merus BV  vs.  IGM Biosciences

Merus BV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merus BV 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

IGM Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IGM Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Merus BV and IGM Biosciences

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

The idea behind Merus BV and IGM Biosciences 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..