Correlation Between Merck and X4 Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Merck and X4 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 X4 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 X4 Pharmaceuticals, you can compare the effects of market volatilities on Merck and X4 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 X4 Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and X4 Pharmaceuticals.

Diversification Opportunities for Merck and X4 Pharmaceuticals

-0.59

Correlation Coefficient

Merck  X4 Pharmaceuticals

Excellent diversification

The 3 months correlation between Merck and XFOR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and X4 Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X4 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 X4 Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X4 Pharmaceuticals has no effect on the direction of Merck i.e., Merck and X4 Pharmaceuticals go up and down completely randomly.

Pair Corralation between Merck and X4 Pharmaceuticals

Considering the 90-day investment horizon Merck is expected to generate 2.73 times less return on investment than X4 Pharmaceuticals. But when comparing it to its historical volatility, Merck Company is 8.57 times less risky than X4 Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. X4 Pharmaceuticals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  277.00  in X4 Pharmaceuticals on May 21, 2025 and sell it today you would lose (28.00) from holding X4 Pharmaceuticals or give up 10.11% of portfolio value over 90 days.

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

Merck Company  vs.  X4 Pharmaceuticals

Merck Company

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in September 2025.

X4 Pharmaceuticals

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in X4 Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, X4 Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and X4 Pharmaceuticals

The main advantage of trading using opposite Merck and X4 Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, X4 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 X4 Pharmaceuticals will offset losses from the drop in X4 Pharmaceuticals' long position.

The idea behind Merck Company and X4 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.