Correlation Between Franklin Libertyshares and Mereo BioPharma

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

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

Diversification Opportunities for Franklin Libertyshares and Mereo BioPharma

0.79

Correlation Coefficient

Franklin Libertyshares  Mereo BioPharma

Poor diversification

The 3 months correlation between Franklin and Mereo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Libertyshares ICAV 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 Franklin Libertyshares 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 Franklin Libertyshares ICAV 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 Franklin Libertyshares i.e., Franklin Libertyshares and Mereo BioPharma go up and down completely randomly.

Pair Corralation between Franklin Libertyshares and Mereo BioPharma

Assuming the 90 days trading horizon Franklin Libertyshares ICAV is expected to generate 0.18 times more return on investment than Mereo BioPharma. However, Franklin Libertyshares ICAV is 5.64 times less risky than Mereo BioPharma. It trades about -0.16 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  2,994  in Franklin Libertyshares ICAV on October 8, 2024 and sell it today you would lose (238.00) from holding Franklin Libertyshares ICAV or give up 7.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Franklin Libertyshares ICAV  vs.  Mereo BioPharma Group

Franklin Libertyshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Libertyshares ICAV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Franklin Libertyshares and Mereo BioPharma

The main advantage of trading using opposite Franklin Libertyshares and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Libertyshares 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 Franklin Libertyshares ICAV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.