Correlation Between Mereo BioPharma and River

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

Diversification Opportunities for Mereo BioPharma and River

-0.78

Correlation Coefficient

Mereo BioPharma  River

Pay attention - limited upside

The 3 months correlation between Mereo and River is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and River and Mercantile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River and Mercantile 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 River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River and Mercantile has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and River go up and down completely randomly.

Pair Corralation between Mereo BioPharma and River

Assuming the 90 days trading horizon Mereo BioPharma Group is expected to generate 42.51 times more return on investment than River. However, Mereo BioPharma is 42.51 times more volatile than River and Mercantile. It trades about 0.0 of its potential returns per unit of risk. River and Mercantile is currently generating about -0.23 per unit of risk. If you would invest  358.00  in Mereo BioPharma Group on October 5, 2024 and sell it today you would lose (11.00) from holding Mereo BioPharma Group or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Mereo BioPharma Group  vs.  River and Mercantile

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

River and Mercantile

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mereo BioPharma and River

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

The idea behind Mereo BioPharma Group and River and Mercantile 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.