Correlation Between Nuvalent and Merus BV

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

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

Diversification Opportunities for Nuvalent and Merus BV

-0.23

Correlation Coefficient

Nuvalent  Merus BV

Very good diversification

The 3 months correlation between Nuvalent and Merus is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Nuvalent 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 Nuvalent are associated (or correlated) with Merus BV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merus BV has no effect on the direction of Nuvalent i.e., Nuvalent and Merus BV go up and down completely randomly.

Pair Corralation between Nuvalent and Merus BV

Given the investment horizon of 90 days Nuvalent is expected to under-perform the Merus BV. In addition to that, Nuvalent is 1.05 times more volatile than Merus BV. It trades about -0.04 of its total potential returns per unit of risk. Merus BV is currently generating about 0.1 per unit of volatility. If you would invest  4,245  in Merus BV on December 21, 2024 and sell it today you would earn a total of  586.00  from holding Merus BV or generate 13.8% return on investment over 90 days.

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

Nuvalent  vs.  Merus BV

Nuvalent

Risk-Adjusted Performance

Very Weak

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

Merus BV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merus BV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Merus BV unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuvalent and Merus BV

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

The idea behind Nuvalent and Merus BV 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.