Correlation Between Zenith Capital and Merrimack Pharmaceuticals

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

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

Diversification Opportunities for Zenith Capital and Merrimack Pharmaceuticals

0.75

Correlation Coefficient

Zenith Capital  Merrimack Pharmaceuticals

Poor diversification

The 3 months correlation between Zenith and Merrimack is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Zenith Capital Corp and Merrimack Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrimack Pharmaceuticals and Zenith Capital 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 Zenith Capital Corp 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 Zenith Capital i.e., Zenith Capital and Merrimack Pharmaceuticals go up and down completely randomly.

Pair Corralation between Zenith Capital and Merrimack Pharmaceuticals

If you would invest  8.00  in Zenith Capital Corp on October 26, 2024 and sell it today you would lose (7.99) from holding Zenith Capital Corp or give up 99.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.61%
Values	Daily Returns

Zenith Capital Corp  vs.  Merrimack Pharmaceuticals

Zenith Capital Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zenith Capital Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Zenith Capital reported 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 Zenith Capital and Merrimack Pharmaceuticals

The main advantage of trading using opposite Zenith Capital and Merrimack Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zenith Capital 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 Zenith Capital Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.