Correlation Between Merus BV and Lyell Immunopharma

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

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

Diversification Opportunities for Merus BV and Lyell Immunopharma

0.3

Correlation Coefficient

Merus BV  Lyell Immunopharma

Weak diversification

The 3 months correlation between Merus and Lyell is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Merus BV and Lyell Immunopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyell Immunopharma 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 Lyell Immunopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyell Immunopharma has no effect on the direction of Merus BV i.e., Merus BV and Lyell Immunopharma go up and down completely randomly.

Pair Corralation between Merus BV and Lyell Immunopharma

Given the investment horizon of 90 days Merus BV is expected to generate 0.49 times more return on investment than Lyell Immunopharma. However, Merus BV is 2.06 times less risky than Lyell Immunopharma. It trades about 0.06 of its potential returns per unit of risk. Lyell Immunopharma is currently generating about 0.01 per unit of risk. If you would invest  4,189  in Merus BV on December 28, 2024 and sell it today you would earn a total of  294.00  from holding Merus BV or generate 7.02% return on investment over 90 days.

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

Merus BV  vs.  Lyell Immunopharma

Merus BV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merus BV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Merus BV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lyell Immunopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyell Immunopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Lyell Immunopharma is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Merus BV and Lyell Immunopharma

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

The idea behind Merus BV and Lyell Immunopharma 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.