Correlation Between Mereo BioPharma and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Mereo BioPharma and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Mereo BioPharma and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mereo BioPharma and Dow Jones.
Diversification Opportunities for Mereo BioPharma and Dow Jones
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mereo and Dow is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Dow Jones go up and down completely randomly.
Pair Corralation between Mereo BioPharma and Dow Jones
Assuming the 90 days trading horizon Mereo BioPharma Group is expected to generate 5.95 times more return on investment than Dow Jones. However, Mereo BioPharma is 5.95 times more volatile than Dow Jones Industrial. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 236.00 in Mereo BioPharma Group on August 25, 2024 and sell it today you would earn a total of 136.00 from holding Mereo BioPharma Group or generate 57.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.28% |
| Values | Daily Returns |
Mereo BioPharma Group vs. Dow Jones Industrial
Performance |
| Timeline |
Mereo BioPharma and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Mereo BioPharma Group
Pair trading matchups for Mereo BioPharma
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Mereo BioPharma and Dow Jones
The main advantage of trading using opposite Mereo BioPharma and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mereo BioPharma position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Mereo BioPharma vs. Samsung Electronics Co | Mereo BioPharma vs. Samsung Electronics Co | Mereo BioPharma vs. Hyundai Motor | Mereo BioPharma vs. Toyota Motor Corp |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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