Correlation Between Global Opportunities and Mereo BioPharma

Can any of the company-specific risk be diversified away by investing in both Global Opportunities and Mereo BioPharma 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 Global Opportunities and Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Opportunities Trust and Mereo BioPharma Group, you can compare the effects of market volatilities on Global Opportunities and Mereo BioPharma 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 Global Opportunities with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Opportunities and Mereo BioPharma.

Diversification Opportunities for Global Opportunities and Mereo BioPharma

0.27

Correlation Coefficient

Global Opportunities  Mereo BioPharma

Modest diversification

The 3 months correlation between Global and Mereo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunities Trust and Mereo BioPharma Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mereo BioPharma Group and Global Opportunities 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 Global Opportunities Trust are associated (or correlated) with Mereo BioPharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mereo BioPharma Group has no effect on the direction of Global Opportunities i.e., Global Opportunities and Mereo BioPharma go up and down completely randomly.

Pair Corralation between Global Opportunities and Mereo BioPharma

Assuming the 90 days trading horizon Global Opportunities Trust is expected to under-perform the Mereo BioPharma. But the stock apears to be less risky and, when comparing its historical volatility, Global Opportunities Trust is 4.1 times less risky than Mereo BioPharma. The stock trades about -0.01 of its potential returns per unit of risk. The Mereo BioPharma Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Mereo BioPharma Group on October 3, 2024 and sell it today you would earn a total of  255.00  from holding Mereo BioPharma Group or generate 280.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.59%
Values	Daily Returns

Global Opportunities Trust  vs.  Mereo BioPharma Group

Global Opportunities

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 uncertain 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.

Pair Trading with Global Opportunities and Mereo BioPharma

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

The idea behind Global Opportunities Trust and Mereo BioPharma Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.