Correlation Between Merus BV and Keros Therapeutics

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

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

Diversification Opportunities for Merus BV and Keros Therapeutics

0.42

Correlation Coefficient

Merus BV  Keros Therapeutics

Very weak diversification

The 3 months correlation between Merus and Keros is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merus BV and Keros Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keros Therapeutics 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 Keros Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keros Therapeutics has no effect on the direction of Merus BV i.e., Merus BV and Keros Therapeutics go up and down completely randomly.

Pair Corralation between Merus BV and Keros Therapeutics

Given the investment horizon of 90 days Merus BV is expected to under-perform the Keros Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Merus BV is 1.17 times less risky than Keros Therapeutics. The stock trades about -0.01 of its potential returns per unit of risk. The Keros Therapeutics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,779  in Keros Therapeutics on September 3, 2024 and sell it today you would earn a total of  995.00  from holding Keros Therapeutics or generate 20.82% return on investment over 90 days.

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

Merus BV  vs.  Keros Therapeutics

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 comparatively stable basic indicators, Merus BV is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Keros Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keros Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Keros Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merus BV and Keros Therapeutics

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

The idea behind Merus BV and Keros Therapeutics 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 Global Correlations module to find global opportunities by holding instruments from different markets.