Correlation Between ProMIS Neurosciences and Merrimack Pharmaceuticals

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

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

Diversification Opportunities for ProMIS Neurosciences and Merrimack Pharmaceuticals

0.5

Correlation Coefficient

ProMIS Neurosciences  Merrimack Pharmaceuticals

Very weak diversification

The 3 months correlation between ProMIS and Merrimack is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ProMIS Neurosciences and Merrimack Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrimack Pharmaceuticals and ProMIS Neurosciences 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 ProMIS Neurosciences 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 ProMIS Neurosciences i.e., ProMIS Neurosciences and Merrimack Pharmaceuticals go up and down completely randomly.

Pair Corralation between ProMIS Neurosciences and Merrimack Pharmaceuticals

If you would invest  1,196  in Merrimack Pharmaceuticals on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Merrimack Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

ProMIS Neurosciences  vs.  Merrimack Pharmaceuticals

ProMIS Neurosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProMIS Neurosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 ProMIS Neurosciences and Merrimack Pharmaceuticals

The main advantage of trading using opposite ProMIS Neurosciences and Merrimack Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProMIS Neurosciences 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 ProMIS Neurosciences 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.