Correlation Between Merus BV and Ikena Oncology

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

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

Diversification Opportunities for Merus BV and Ikena Oncology

0.26

Correlation Coefficient

Merus BV  Ikena Oncology

Modest diversification

The 3 months correlation between Merus and Ikena is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Merus BV and Ikena Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ikena Oncology and Merus BV 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 Merus BV are associated (or correlated) with Ikena Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ikena Oncology has no effect on the direction of Merus BV i.e., Merus BV and Ikena Oncology go up and down completely randomly.

Pair Corralation between Merus BV and Ikena Oncology

Given the investment horizon of 90 days Merus BV is expected to under-perform the Ikena Oncology. In addition to that, Merus BV is 1.79 times more volatile than Ikena Oncology. It trades about -0.23 of its total potential returns per unit of risk. Ikena Oncology is currently generating about -0.01 per unit of volatility. If you would invest  170.00  in Ikena Oncology on August 31, 2024 and sell it today you would lose (1.00) from holding Ikena Oncology or give up 0.59% of portfolio value over 90 days.

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

Merus BV  vs.  Ikena Oncology

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 weak 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.

Ikena Oncology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ikena Oncology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ikena Oncology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merus BV and Ikena Oncology

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

The idea behind Merus BV and Ikena Oncology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.