Correlation Between Revolution Medicines and Merus BV

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

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

Diversification Opportunities for Revolution Medicines and Merus BV

-0.36

Correlation Coefficient

Revolution Medicines  Merus BV

Very good diversification

The 3 months correlation between Revolution and Merus is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Merus BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merus BV and Revolution Medicines 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 Revolution Medicines are associated (or correlated) with Merus BV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merus BV has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Merus BV go up and down completely randomly.

Pair Corralation between Revolution Medicines and Merus BV

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the Merus BV. But the stock apears to be less risky and, when comparing its historical volatility, Revolution Medicines is 2.25 times less risky than Merus BV. The stock trades about -0.08 of its potential returns per unit of risk. The Merus BV is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,277  in Merus BV on May 8, 2025 and sell it today you would earn a total of  2,280  from holding Merus BV or generate 53.32% return on investment over 90 days.

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

Revolution Medicines  vs.  Merus BV

Revolution Medicines

Risk-Adjusted Performance

Weakest

Over the last 90 days Revolution Medicines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Merus BV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Merus BV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Merus BV unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Revolution Medicines and Merus BV

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

The idea behind Revolution Medicines and Merus BV 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.