Correlation Between Mereo BioPharma and Immunitybio

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

Diversification Opportunities for Mereo BioPharma and Immunitybio

-0.48

Correlation Coefficient

Mereo BioPharma  Immunitybio

Very good diversification

The 3 months correlation between Mereo and Immunitybio is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Immunitybio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immunitybio 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 Immunitybio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immunitybio has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Immunitybio go up and down completely randomly.

Pair Corralation between Mereo BioPharma and Immunitybio

Given the investment horizon of 90 days Mereo BioPharma Group is expected to generate 0.56 times more return on investment than Immunitybio. However, Mereo BioPharma Group is 1.78 times less risky than Immunitybio. It trades about 0.08 of its potential returns per unit of risk. Immunitybio is currently generating about 0.05 per unit of risk. If you would invest  92.00  in Mereo BioPharma Group on August 31, 2024 and sell it today you would earn a total of  269.00  from holding Mereo BioPharma Group or generate 292.39% return on investment over 90 days.

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

Mereo BioPharma Group  vs.  Immunitybio

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 December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Immunitybio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Immunitybio are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Immunitybio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mereo BioPharma and Immunitybio

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

The idea behind Mereo BioPharma Group and Immunitybio 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.