Correlation Between Virpax Pharmaceuticals and Mersana Therapeutics

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

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

Diversification Opportunities for Virpax Pharmaceuticals and Mersana Therapeutics

-0.56

Correlation Coefficient

Virpax Pharmaceuticals  Mersana Therapeutics

Excellent diversification

The 3 months correlation between Virpax and Mersana is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Virpax Pharmaceuticals and Mersana Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mersana Therapeutics and Virpax Pharmaceuticals 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 Virpax Pharmaceuticals are associated (or correlated) with Mersana Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mersana Therapeutics has no effect on the direction of Virpax Pharmaceuticals i.e., Virpax Pharmaceuticals and Mersana Therapeutics go up and down completely randomly.

Pair Corralation between Virpax Pharmaceuticals and Mersana Therapeutics

Given the investment horizon of 90 days Virpax Pharmaceuticals is expected to under-perform the Mersana Therapeutics. In addition to that, Virpax Pharmaceuticals is 1.34 times more volatile than Mersana Therapeutics. It trades about -0.02 of its total potential returns per unit of risk. Mersana Therapeutics is currently generating about 0.18 per unit of volatility. If you would invest  135.00  in Mersana Therapeutics on August 17, 2024 and sell it today you would earn a total of  117.00  from holding Mersana Therapeutics or generate 86.67% return on investment over 90 days.

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

Virpax Pharmaceuticals  vs.  Mersana Therapeutics

Virpax Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virpax Pharmaceuticals 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 basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Mersana Therapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mersana Therapeutics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mersana Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Virpax Pharmaceuticals and Mersana Therapeutics

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

The idea behind Virpax Pharmaceuticals and Mersana Therapeutics 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.