Correlation Between Abcam Plc and Merck

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

Diversification Opportunities for Abcam Plc and Merck

  Correlation Coefficient

Very good diversification

The 3 months correlation between Abcam and Merck is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Abcam Plc ADR and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Abcam Plc 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 Abcam Plc ADR 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 Abcam Plc i.e., Abcam Plc and Merck go up and down completely randomly.

Pair Corralation between Abcam Plc and Merck

Given the investment horizon of 90 days Abcam Plc ADR is expected to under-perform the Merck. In addition to that, Abcam Plc is 1.78 times more volatile than Merck Company. It trades about -0.06 of its total potential returns per unit of risk. Merck Company is currently generating about -0.06 per unit of volatility. If you would invest  8,855  in Merck Company on June 27, 2022 and sell it today you would lose (177.00)  from holding Merck Company or give up 2.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
ValuesDaily Returns

Abcam Plc ADR  vs.  Merck Company

 Performance (%) 
Abcam Plc ADR 
Abcam Performance
0 of 100
Over the last 90 days Abcam Plc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady fundamental indicators, Abcam Plc is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Abcam 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 sluggish 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

Abcam Plc and Merck Volatility Contrast

   Predicted Return Density   

Pair Trading with Abcam Plc and Merck

The main advantage of trading using opposite Abcam Plc and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abcam Plc 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 Abcam Plc ADR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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