Correlation Between Nuvalent and MERCK

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

By analyzing existing cross correlation between Nuvalent and MERCK INC 595, you can compare the effects of market volatilities on Nuvalent and MERCK 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 Nuvalent with a short position of MERCK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvalent and MERCK.

Diversification Opportunities for Nuvalent and MERCK

0.62

Correlation Coefficient

Nuvalent  MERCK

Poor diversification

The 3 months correlation between Nuvalent and MERCK is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and MERCK INC 595 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MERCK INC 595 and Nuvalent 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 Nuvalent are associated (or correlated) with MERCK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MERCK INC 595 has no effect on the direction of Nuvalent i.e., Nuvalent and MERCK go up and down completely randomly.

Pair Corralation between Nuvalent and MERCK

Given the investment horizon of 90 days Nuvalent is expected to under-perform the MERCK. In addition to that, Nuvalent is 5.48 times more volatile than MERCK INC 595. It trades about -0.15 of its total potential returns per unit of risk. MERCK INC 595 is currently generating about -0.05 per unit of volatility. If you would invest  10,824  in MERCK INC 595 on September 14, 2024 and sell it today you would lose (149.00) from holding MERCK INC 595 or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.5%
Values	Daily Returns

Nuvalent  vs.  MERCK INC 595

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent 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 quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MERCK INC 595

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MERCK INC 595 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MERCK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuvalent and MERCK

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

The idea behind Nuvalent and MERCK INC 595 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.