Correlation Between Aadi Biosciences and Merck

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Can any of the company-specific risk be diversified away by investing in both Aadi Biosciences and Merck 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 Aadi Biosciences and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aadi Biosciences and Merck Company, you can compare the effects of market volatilities on Aadi Biosciences and Merck 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 Aadi Biosciences with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aadi Biosciences and Merck.

Diversification Opportunities for Aadi Biosciences and Merck

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Aadi Biosciences and Merck is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Aadi Biosciences and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Aadi Biosciences 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 Aadi Biosciences are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Aadi Biosciences i.e., Aadi Biosciences and Merck go up and down completely randomly.

Pair Corralation between Aadi Biosciences and Merck

Given the investment horizon of 90 days Aadi Biosciences is expected to generate 2.58 times more return on investment than Merck. However, Aadi Biosciences is 2.58 times more volatile than Merck Company. It trades about 0.03 of its potential returns per unit of risk. Merck Company is currently generating about 0.06 per unit of risk. If you would invest  1,355  in Aadi Biosciences on July 2, 2022 and sell it today you would earn a total of  15.00  from holding Aadi Biosciences or generate 1.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Aadi Biosciences  vs.  Merck Company

 Performance (%) 
       Timeline  
Aadi Biosciences 
Aadi Biosciences Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Aadi Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aadi Biosciences is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Aadi Biosciences Price Channel

Merck Company 
Merck Performance
0 of 100
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Merck Price Channel

Aadi Biosciences and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aadi Biosciences and Merck

The main advantage of trading using opposite Aadi Biosciences and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aadi Biosciences position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.
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The idea behind Aadi Biosciences and Merck Company 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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Check out your portfolio center. 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 Fund Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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