Correlation Between Mereo BioPharma and Scorpius Holdings

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

Diversification Opportunities for Mereo BioPharma and Scorpius Holdings

0.71

Correlation Coefficient

Mereo BioPharma  Scorpius Holdings

Poor diversification

The 3 months correlation between Mereo and Scorpius is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Scorpius Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scorpius Holdings 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 Scorpius Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scorpius Holdings has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Scorpius Holdings go up and down completely randomly.

Pair Corralation between Mereo BioPharma and Scorpius Holdings

Given the investment horizon of 90 days Mereo BioPharma Group is expected to generate 0.37 times more return on investment than Scorpius Holdings. However, Mereo BioPharma Group is 2.67 times less risky than Scorpius Holdings. It trades about -0.17 of its potential returns per unit of risk. Scorpius Holdings is currently generating about -0.08 per unit of risk. If you would invest  453.00  in Mereo BioPharma Group on October 21, 2024 and sell it today you would lose (167.00) from holding Mereo BioPharma Group or give up 36.87% of portfolio value over 90 days.

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

Mereo BioPharma Group  vs.  Scorpius Holdings

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

Scorpius Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scorpius Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mereo BioPharma and Scorpius Holdings

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

The idea behind Mereo BioPharma Group and Scorpius Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.