Correlation Between Mereo BioPharma and Amicus Therapeutics

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

Diversification Opportunities for Mereo BioPharma and Amicus Therapeutics

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Mereo and Amicus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Amicus Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amicus Therapeutics and Mereo 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 Mereo BioPharma Group are associated (or correlated) with Amicus Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amicus Therapeutics has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Amicus Therapeutics go up and down completely randomly.

Pair Corralation between Mereo BioPharma and Amicus Therapeutics

Given the investment horizon of 90 days Mereo BioPharma Group is expected to under-perform the Amicus Therapeutics. In addition to that, Mereo BioPharma is 1.44 times more volatile than Amicus Therapeutics. It trades about -0.1 of its total potential returns per unit of risk. Amicus Therapeutics is currently generating about -0.08 per unit of volatility. If you would invest  1,161  in Amicus Therapeutics on August 30, 2024 and sell it today you would lose (165.00) from holding Amicus Therapeutics or give up 14.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Mereo BioPharma Group  vs.  Amicus Therapeutics

 Performance 
       Timeline  
Mereo BioPharma Group 

Risk-Adjusted Performance

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Weak
 
Strong
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 weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Amicus Therapeutics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Amicus Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Mereo BioPharma and Amicus Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mereo BioPharma and Amicus Therapeutics

The main advantage of trading using opposite Mereo BioPharma and Amicus Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mereo BioPharma position performs unexpectedly, Amicus Therapeutics 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 Amicus Therapeutics will offset losses from the drop in Amicus Therapeutics' long position.
The idea behind Mereo BioPharma Group and Amicus Therapeutics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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