Correlation Between Franklin FTSE and Mereo BioPharma

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

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

Diversification Opportunities for Franklin FTSE and Mereo BioPharma

0.43

Correlation Coefficient

Franklin FTSE  Mereo BioPharma

Very weak diversification

The 3 months correlation between Franklin and Mereo is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil 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 Franklin FTSE 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 Franklin FTSE Brazil 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 Franklin FTSE i.e., Franklin FTSE and Mereo BioPharma go up and down completely randomly.

Pair Corralation between Franklin FTSE and Mereo BioPharma

Assuming the 90 days trading horizon Franklin FTSE Brazil is expected to generate 0.33 times more return on investment than Mereo BioPharma. However, Franklin FTSE Brazil is 3.01 times less risky than Mereo BioPharma. It trades about -0.1 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about -0.09 per unit of risk. If you would invest  1,919  in Franklin FTSE Brazil on August 30, 2024 and sell it today you would lose (164.00) from holding Franklin FTSE Brazil or give up 8.55% of portfolio value over 90 days.

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

Franklin FTSE Brazil  vs.  Mereo BioPharma Group

Franklin FTSE Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Franklin FTSE and Mereo BioPharma

The main advantage of trading using opposite Franklin FTSE and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin FTSE 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 Franklin FTSE Brazil 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.