Correlation Between Arbutus Biopharma and Merck

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

Diversification Opportunities for Arbutus Biopharma and Merck

  Correlation Coefficient

Excellent diversification

The 3 months correlation between Arbutus and Merck is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Arbutus Biopharma Corp and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Arbutus Biopharma 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 Arbutus Biopharma Corp 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 Arbutus Biopharma i.e., Arbutus Biopharma and Merck go up and down completely randomly.

Pair Corralation between Arbutus Biopharma and Merck

Given the investment horizon of 90 days Arbutus Biopharma Corp is expected to generate 2.41 times more return on investment than Merck. However, Arbutus Biopharma is 2.41 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 0.04 per unit of risk. If you would invest  245.00  in Arbutus Biopharma Corp on March 6, 2023 and sell it today you would earn a total of  13.00  from holding Arbutus Biopharma Corp or generate 5.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Arbutus Biopharma Corp  vs.  Merck Company

 Performance (%) 
Arbutus Biopharma Corp 

Arbutus Performance

0 of 100

Over the last 90 days Arbutus Biopharma Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Merck Company 

Merck Performance

2 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Arbutus Biopharma and Merck Volatility Contrast

   Predicted Return Density   

Pair Trading with Arbutus Biopharma and Merck

The main advantage of trading using opposite Arbutus Biopharma and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbutus Biopharma 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.
The idea behind Arbutus Biopharma Corp 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.
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 the Transaction History module to view history of all your transactions and understand their impact on performance.

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