Correlation Between Elevation Oncology and Merck

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

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

Diversification Opportunities for Elevation Oncology and Merck

0.34

Correlation Coefficient

Elevation Oncology  Merck

Weak diversification

The 3 months correlation between Elevation and Merck is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Elevation Oncology and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Elevation Oncology 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 Elevation Oncology 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 Company has no effect on the direction of Elevation Oncology i.e., Elevation Oncology and Merck go up and down completely randomly.

Pair Corralation between Elevation Oncology and Merck

Given the investment horizon of 90 days Elevation Oncology is expected to under-perform the Merck. In addition to that, Elevation Oncology is 3.35 times more volatile than Merck Company. It trades about -0.09 of its total potential returns per unit of risk. Merck Company is currently generating about -0.11 per unit of volatility. If you would invest  9,894  in Merck Company on February 3, 2025 and sell it today you would lose (1,576) from holding Merck Company or give up 15.93% of portfolio value over 90 days.

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

Elevation Oncology  vs.  Merck Company

Elevation Oncology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elevation Oncology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in June 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Elevation Oncology and Merck

The main advantage of trading using opposite Elevation Oncology and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elevation Oncology 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 Elevation Oncology and Merck Company 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.