Correlation Between Sensei Biotherapeutics and Merrimack Pharmaceuticals

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

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

Diversification Opportunities for Sensei Biotherapeutics and Merrimack Pharmaceuticals

0.16

Correlation Coefficient

Sensei Biotherapeutics  Merrimack Pharmaceuticals

Average diversification

The 3 months correlation between Sensei and Merrimack is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sensei Biotherapeutics and Merrimack Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrimack Pharmaceuticals and Sensei Biotherapeutics 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 Sensei Biotherapeutics are associated (or correlated) with Merrimack Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrimack Pharmaceuticals has no effect on the direction of Sensei Biotherapeutics i.e., Sensei Biotherapeutics and Merrimack Pharmaceuticals go up and down completely randomly.

Pair Corralation between Sensei Biotherapeutics and Merrimack Pharmaceuticals

Given the investment horizon of 90 days Sensei Biotherapeutics is expected to generate 8.53 times less return on investment than Merrimack Pharmaceuticals. In addition to that, Sensei Biotherapeutics is 5.59 times more volatile than Merrimack Pharmaceuticals. It trades about 0.0 of its total potential returns per unit of risk. Merrimack Pharmaceuticals is currently generating about 0.08 per unit of volatility. If you would invest  1,047  in Merrimack Pharmaceuticals on September 15, 2024 and sell it today you would earn a total of  149.00  from holding Merrimack Pharmaceuticals or generate 14.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	29.09%
Values	Daily Returns

Sensei Biotherapeutics  vs.  Merrimack Pharmaceuticals

Sensei Biotherapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sensei Biotherapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Sensei Biotherapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Merrimack Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sensei Biotherapeutics and Merrimack Pharmaceuticals

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

The idea behind Sensei Biotherapeutics and Merrimack Pharmaceuticals 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.