Correlation Between Biovie and Mereo BioPharma

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

By analyzing existing cross correlation between Biovie Inc and Mereo BioPharma Group, you can compare the effects of market volatilities on Biovie and Mereo BioPharma 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 Biovie with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biovie and Mereo BioPharma.

Diversification Opportunities for Biovie and Mereo BioPharma

-0.33

Correlation Coefficient

Biovie  Mereo BioPharma

Very good diversification

The 3 months correlation between Biovie and Mereo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Biovie Inc and Mereo BioPharma Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mereo BioPharma Group and Biovie 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 Biovie Inc are associated (or correlated) with Mereo BioPharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mereo BioPharma Group has no effect on the direction of Biovie i.e., Biovie and Mereo BioPharma go up and down completely randomly.

Pair Corralation between Biovie and Mereo BioPharma

Given the investment horizon of 90 days Biovie Inc is expected to generate 3.43 times more return on investment than Mereo BioPharma. However, Biovie is 3.43 times more volatile than Mereo BioPharma Group. It trades about 0.02 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about 0.04 per unit of risk. If you would invest  499.00  in Biovie Inc on September 13, 2024 and sell it today you would lose (240.00) from holding Biovie Inc or give up 48.1% of portfolio value over 90 days.

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

Biovie Inc  vs.  Mereo BioPharma Group

Biovie Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Biovie Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Biovie demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Mereo BioPharma Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mereo BioPharma Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Biovie and Mereo BioPharma

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

The idea behind Biovie Inc and Mereo BioPharma Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.