Correlation Between Merck and NuCana PLC
Can any of the company-specific risk be diversified away by investing in both Merck and NuCana PLC 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 Merck and NuCana PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and NuCana PLC, you can compare the effects of market volatilities on Merck and NuCana PLC 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 Merck with a short position of NuCana PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and NuCana PLC.
Diversification Opportunities for Merck and NuCana PLC
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and NuCana is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and NuCana PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuCana PLC and Merck 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 Merck Company are associated (or correlated) with NuCana PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuCana PLC has no effect on the direction of Merck i.e., Merck and NuCana PLC go up and down completely randomly.
Pair Corralation between Merck and NuCana PLC
Considering the 90-day investment horizon Merck is expected to generate 2.64 times less return on investment than NuCana PLC. But when comparing it to its historical volatility, Merck Company is 12.41 times less risky than NuCana PLC. It trades about 0.01 of its potential returns per unit of risk. NuCana PLC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 945.00 in NuCana PLC on September 2, 2024 and sell it today you would lose (815.00) from holding NuCana PLC or give up 86.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. NuCana PLC
Performance |
| Timeline |
| Merck Company |
| NuCana PLC |
Merck and NuCana PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and NuCana PLC
The main advantage of trading using opposite Merck and NuCana PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, NuCana PLC 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 NuCana PLC will offset losses from the drop in NuCana PLC's long position.The idea behind Merck Company and NuCana PLC 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.| NuCana PLC vs. Zura Bio Limited | NuCana PLC vs. ZyVersa Therapeutics | NuCana PLC vs. Cidara Therapeutics | NuCana PLC vs. Silence Therapeutics PLC |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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