Correlation Between Sana Biotechnology and Merus BV

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

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

Diversification Opportunities for Sana Biotechnology and Merus BV

0.76

Correlation Coefficient

Sana Biotechnology  Merus BV

Poor diversification

The 3 months correlation between Sana and Merus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sana Biotechnology and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Sana Biotechnology 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 Sana Biotechnology 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 Sana Biotechnology i.e., Sana Biotechnology and Merus BV go up and down completely randomly.

Pair Corralation between Sana Biotechnology and Merus BV

Given the investment horizon of 90 days Sana Biotechnology is expected to under-perform the Merus BV. In addition to that, Sana Biotechnology is 2.23 times more volatile than Merus BV. It trades about -0.27 of its total potential returns per unit of risk. Merus BV is currently generating about -0.11 per unit of volatility. If you would invest  4,549  in Merus BV on September 23, 2024 and sell it today you would lose (364.00) from holding Merus BV or give up 8.0% of portfolio value over 90 days.

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

Sana Biotechnology  vs.  Merus BV

Sana Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sana Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 unsteady 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.

Pair Trading with Sana Biotechnology and Merus BV

The main advantage of trading using opposite Sana Biotechnology and Merus BV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sana Biotechnology 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 Sana Biotechnology 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.