Correlation Between Merus BV and Protagonist Therapeutics

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

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

Diversification Opportunities for Merus BV and Protagonist Therapeutics

0.45

Correlation Coefficient

Merus BV  Protagonist Therapeutics

Very weak diversification

The 3 months correlation between Merus and Protagonist is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merus BV and Protagonist Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protagonist Therapeutics 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 Protagonist Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protagonist Therapeutics has no effect on the direction of Merus BV i.e., Merus BV and Protagonist Therapeutics go up and down completely randomly.

Pair Corralation between Merus BV and Protagonist Therapeutics

Given the investment horizon of 90 days Merus BV is expected to under-perform the Protagonist Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Merus BV is 1.32 times less risky than Protagonist Therapeutics. The stock trades about -0.08 of its potential returns per unit of risk. The Protagonist Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,289  in Protagonist Therapeutics on August 30, 2024 and sell it today you would earn a total of  206.00  from holding Protagonist Therapeutics or generate 4.8% return on investment over 90 days.

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

Merus BV  vs.  Protagonist Therapeutics

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Protagonist Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Protagonist Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Protagonist Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Merus BV and Protagonist Therapeutics

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

The idea behind Merus BV and Protagonist Therapeutics 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 Global Correlations module to find global opportunities by holding instruments from different markets.