Correlation Between Nuvation Bio and Merck

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

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

Diversification Opportunities for Nuvation Bio and Merck

0.26

Correlation Coefficient

Nuvation Bio  Merck

Modest diversification

The 3 months correlation between Nuvation and Merck is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nuvation Bio and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Nuvation Bio 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 Nuvation Bio are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Nuvation Bio i.e., Nuvation Bio and Merck go up and down completely randomly.

Pair Corralation between Nuvation Bio and Merck

Given the investment horizon of 90 days Nuvation Bio is expected to generate 3.92 times more return on investment than Merck. However, Nuvation Bio is 3.92 times more volatile than Merck Company. It trades about 0.01 of its potential returns per unit of risk. Merck Company is currently generating about -0.16 per unit of risk. If you would invest  298.00  in Nuvation Bio on September 3, 2024 and sell it today you would lose (8.00) from holding Nuvation Bio or give up 2.68% of portfolio value over 90 days.

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

Nuvation Bio  vs.  Merck Company

Nuvation Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvation Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nuvation Bio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Merck Company

Risk-Adjusted Performance

0 of 100

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 unsteady 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.

Pair Trading with Nuvation Bio and Merck

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

The idea behind Nuvation Bio and Merck Company 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.