Correlation Between RTW Venture and Mereo BioPharma

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

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

Diversification Opportunities for RTW Venture and Mereo BioPharma

0.77

Correlation Coefficient

RTW Venture  Mereo BioPharma

Poor diversification

The 3 months correlation between RTW and Mereo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding RTW Venture Fund 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 RTW Venture 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 RTW Venture Fund 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 RTW Venture i.e., RTW Venture and Mereo BioPharma go up and down completely randomly.

Pair Corralation between RTW Venture and Mereo BioPharma

Assuming the 90 days trading horizon RTW Venture is expected to generate 9.58 times less return on investment than Mereo BioPharma. But when comparing it to its historical volatility, RTW Venture Fund is 3.13 times less risky than Mereo BioPharma. It trades about 0.02 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Mereo BioPharma Group on December 5, 2024 and sell it today you would earn a total of  162.00  from holding Mereo BioPharma Group or generate 188.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

RTW Venture Fund  vs.  Mereo BioPharma Group

RTW Venture Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days RTW Venture Fund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with RTW Venture and Mereo BioPharma

The main advantage of trading using opposite RTW Venture and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RTW Venture 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 RTW Venture Fund 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.