Correlation Between Mereo BioPharma and IVERIC Bio

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

Diversification Opportunities for Mereo BioPharma and IVERIC Bio

-0.46

Correlation Coefficient

Mereo BioPharma  IVERIC Bio

Very good diversification

The 3 months correlation between Mereo and IVERIC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and IVERIC Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IVERIC Bio 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 IVERIC Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IVERIC Bio has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and IVERIC Bio go up and down completely randomly.

Pair Corralation between Mereo BioPharma and IVERIC Bio

If you would invest  3,995  in IVERIC Bio on September 13, 2024 and sell it today you would earn a total of  0.00  from holding IVERIC Bio or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Mereo BioPharma Group  vs.  IVERIC Bio

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 very healthy technical and fundamental indicators, Mereo BioPharma is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

IVERIC Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IVERIC Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, IVERIC Bio is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mereo BioPharma and IVERIC Bio

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

The idea behind Mereo BioPharma Group and IVERIC Bio 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.