Correlation Between Im Cannabis and Mereo BioPharma

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

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

Diversification Opportunities for Im Cannabis and Mereo BioPharma

-0.49

Correlation Coefficient

Im Cannabis  Mereo BioPharma

Very good diversification

The 3 months correlation between IMCC and Mereo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Im Cannabis Corp 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 Im Cannabis 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 Im Cannabis Corp 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 Im Cannabis i.e., Im Cannabis and Mereo BioPharma go up and down completely randomly.

Pair Corralation between Im Cannabis and Mereo BioPharma

Given the investment horizon of 90 days Im Cannabis Corp is expected to generate 2.6 times more return on investment than Mereo BioPharma. However, Im Cannabis is 2.6 times more volatile than Mereo BioPharma Group. It trades about 0.06 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about 0.04 per unit of risk. If you would invest  163.00  in Im Cannabis Corp on October 9, 2024 and sell it today you would earn a total of  99.00  from holding Im Cannabis Corp or generate 60.74% return on investment over 90 days.

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

Im Cannabis Corp  vs.  Mereo BioPharma Group

Im Cannabis Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Im Cannabis Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Im Cannabis exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Im Cannabis and Mereo BioPharma

The main advantage of trading using opposite Im Cannabis and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Im Cannabis 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 Im Cannabis Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.