Correlation Between Mersana Therapeutics and LendingClub Corp

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

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

Diversification Opportunities for Mersana Therapeutics and LendingClub Corp

-0.27

Correlation Coefficient

Mersana Therapeutics  LendingClub Corp

Very good diversification

The 3 months correlation between Mersana and LendingClub is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mersana Therapeutics and LendingClub Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub Corp and Mersana Therapeutics 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 Mersana Therapeutics are associated (or correlated) with LendingClub Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub Corp has no effect on the direction of Mersana Therapeutics i.e., Mersana Therapeutics and LendingClub Corp go up and down completely randomly.

Pair Corralation between Mersana Therapeutics and LendingClub Corp

Given the investment horizon of 90 days Mersana Therapeutics is expected to under-perform the LendingClub Corp. In addition to that, Mersana Therapeutics is 1.85 times more volatile than LendingClub Corp. It trades about -0.32 of its total potential returns per unit of risk. LendingClub Corp is currently generating about -0.28 per unit of volatility. If you would invest  876.00  in LendingClub Corp on February 1, 2024 and sell it today you would lose (124.00) from holding LendingClub Corp or give up 14.16% of portfolio value over 90 days.

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

Mersana Therapeutics  vs.  LendingClub Corp

Mersana Therapeutics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Mersana Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mersana Therapeutics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

LendingClub Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LendingClub Corp 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 fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Mersana Therapeutics and LendingClub Corp

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

The idea behind Mersana Therapeutics and LendingClub Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.