Correlation Between Mereo BioPharma and OptiNose

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

Diversification Opportunities for Mereo BioPharma and OptiNose

0.6

Correlation Coefficient

Mereo BioPharma  OptiNose

Poor diversification

The 3 months correlation between Mereo and OptiNose is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and OptiNose in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OptiNose 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 OptiNose. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OptiNose has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and OptiNose go up and down completely randomly.

Pair Corralation between Mereo BioPharma and OptiNose

Given the investment horizon of 90 days Mereo BioPharma Group is expected to generate 0.93 times more return on investment than OptiNose. However, Mereo BioPharma Group is 1.08 times less risky than OptiNose. It trades about 0.07 of its potential returns per unit of risk. OptiNose is currently generating about -0.04 per unit of risk. If you would invest  89.00  in Mereo BioPharma Group on November 19, 2024 and sell it today you would earn a total of  198.00  from holding Mereo BioPharma Group or generate 222.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Mereo BioPharma Group  vs.  OptiNose

Mereo BioPharma Group

Risk-Adjusted Performance

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 March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

OptiNose

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OptiNose are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, OptiNose displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mereo BioPharma and OptiNose

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

The idea behind Mereo BioPharma Group and OptiNose 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.