Correlation Between Merck and Recursion Pharmaceuticals

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

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

Diversification Opportunities for Merck and Recursion Pharmaceuticals

0.67

Correlation Coefficient

Merck  Recursion Pharmaceuticals

Poor diversification

The 3 months correlation between Merck and Recursion is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Recursion Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recursion Pharmaceuticals and Merck 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 Merck Company are associated (or correlated) with Recursion Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recursion Pharmaceuticals has no effect on the direction of Merck i.e., Merck and Recursion Pharmaceuticals go up and down completely randomly.

Pair Corralation between Merck and Recursion Pharmaceuticals

Considering the 90-day investment horizon Merck is expected to generate 3.66 times less return on investment than Recursion Pharmaceuticals. But when comparing it to its historical volatility, Merck Company is 2.99 times less risky than Recursion Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Recursion Pharmaceuticals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  541.00  in Recursion Pharmaceuticals on April 20, 2025 and sell it today you would earn a total of  43.00  from holding Recursion Pharmaceuticals or generate 7.95% return on investment over 90 days.

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

Merck Company  vs.  Recursion Pharmaceuticals

Merck Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Recursion Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Recursion Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Recursion Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Recursion Pharmaceuticals

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

The idea behind Merck Company and Recursion 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.