Correlation Between Pharvaris and Merck

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

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

Diversification Opportunities for Pharvaris and Merck

-0.58

Correlation Coefficient

Pharvaris  Merck

Excellent diversification

The 3 months correlation between Pharvaris and Merck is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pharvaris BV and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Pharvaris 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 Pharvaris BV 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 Pharvaris i.e., Pharvaris and Merck go up and down completely randomly.

Pair Corralation between Pharvaris and Merck

Given the investment horizon of 90 days Pharvaris BV is expected to generate 3.37 times more return on investment than Merck. However, Pharvaris is 3.37 times more volatile than Merck Company. It trades about 0.1 of its potential returns per unit of risk. Merck Company is currently generating about -0.17 per unit of risk. If you would invest  1,800  in Pharvaris BV on August 30, 2024 and sell it today you would earn a total of  436.00  from holding Pharvaris BV or generate 24.22% return on investment over 90 days.

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

Pharvaris BV  vs.  Merck Company

Pharvaris BV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pharvaris BV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Pharvaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Pharvaris and Merck

The main advantage of trading using opposite Pharvaris and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pharvaris 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 Pharvaris BV 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.