Correlation Between Protagonist Therapeutics and Merus BV

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

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

Diversification Opportunities for Protagonist Therapeutics and Merus BV

0.66

Correlation Coefficient

Protagonist Therapeutics  Merus BV

Poor diversification

The 3 months correlation between Protagonist and Merus is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Protagonist Therapeutics and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Protagonist Therapeutics 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 Protagonist Therapeutics 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 Protagonist Therapeutics i.e., Protagonist Therapeutics and Merus BV go up and down completely randomly.

Pair Corralation between Protagonist Therapeutics and Merus BV

Given the investment horizon of 90 days Protagonist Therapeutics is expected to generate 2.41 times more return on investment than Merus BV. However, Protagonist Therapeutics is 2.41 times more volatile than Merus BV. It trades about 0.09 of its potential returns per unit of risk. Merus BV is currently generating about 0.05 per unit of risk. If you would invest  3,851  in Protagonist Therapeutics on December 30, 2024 and sell it today you would earn a total of  1,037  from holding Protagonist Therapeutics or generate 26.93% return on investment over 90 days.

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

Protagonist Therapeutics  vs.  Merus BV

Protagonist Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Protagonist Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Protagonist Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Protagonist Therapeutics and Merus BV

The main advantage of trading using opposite Protagonist Therapeutics and Merus BV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Protagonist Therapeutics 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 Protagonist Therapeutics 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.