Correlation Between UBS Plc and Mereo BioPharma
Can any of the company-specific risk be diversified away by investing in both UBS Plc 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 UBS Plc and Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UBS plc and Mereo BioPharma Group, you can compare the effects of market volatilities on UBS Plc 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 UBS Plc with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Plc and Mereo BioPharma.
Diversification Opportunities for UBS Plc and Mereo BioPharma
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between UBS and Mereo is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding UBS plc 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 UBS Plc 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 UBS plc 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 UBS Plc i.e., UBS Plc and Mereo BioPharma go up and down completely randomly.
Pair Corralation between UBS Plc and Mereo BioPharma
Assuming the 90 days trading horizon UBS plc is expected to generate 0.13 times more return on investment than Mereo BioPharma. However, UBS plc is 7.64 times less risky than Mereo BioPharma. It trades about 0.08 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about -0.06 per unit of risk. If you would invest 910,850 in UBS plc on September 9, 2024 and sell it today you would earn a total of 9,550 from holding UBS plc or generate 1.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
UBS plc vs. Mereo BioPharma Group
Performance |
Timeline |
UBS plc |
Mereo BioPharma Group |
UBS Plc and Mereo BioPharma Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with UBS Plc and Mereo BioPharma
The main advantage of trading using opposite UBS Plc and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS Plc 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 UBS plc 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.Mereo BioPharma vs. Gear4music Plc | Mereo BioPharma vs. Kaufman Et Broad | Mereo BioPharma vs. National Beverage Corp | Mereo BioPharma vs. Broadridge Financial Solutions |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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