Correlation Between Mereo BioPharma and Galera Therapeutics

Can any of the company-specific risk be diversified away by investing in both Mereo BioPharma and Galera 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 Galera 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 Galera Therapeutics, you can compare the effects of market volatilities on Mereo BioPharma and Galera 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 Galera Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mereo BioPharma and Galera Therapeutics.

Diversification Opportunities for Mereo BioPharma and Galera Therapeutics

0.29

Correlation Coefficient

Mereo BioPharma  Galera Therapeutics

Modest diversification

The 3 months correlation between Mereo and Galera is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Galera Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galera 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 Galera Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galera Therapeutics has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Galera Therapeutics go up and down completely randomly.

Pair Corralation between Mereo BioPharma and Galera Therapeutics

If you would invest  201.00  in Mereo BioPharma Group on September 2, 2024 and sell it today you would earn a total of  160.00  from holding Mereo BioPharma Group or generate 79.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.4%
Values	Daily Returns

Mereo BioPharma Group  vs.  Galera Therapeutics

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Galera Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galera Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Galera Therapeutics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mereo BioPharma and Galera Therapeutics

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

The idea behind Mereo BioPharma Group and Galera 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.