Correlation Between CAP LEASE and Mereo BioPharma
Can any of the company-specific risk be diversified away by investing in both CAP LEASE 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 CAP LEASE and Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAP LEASE AVIATION and Mereo BioPharma Group, you can compare the effects of market volatilities on CAP LEASE 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 CAP LEASE with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP LEASE and Mereo BioPharma.
Diversification Opportunities for CAP LEASE and Mereo BioPharma
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CAP and Mereo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION 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 CAP LEASE 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 CAP LEASE AVIATION 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 CAP LEASE i.e., CAP LEASE and Mereo BioPharma go up and down completely randomly.
Pair Corralation between CAP LEASE and Mereo BioPharma
Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to under-perform the Mereo BioPharma. But the stock apears to be less risky and, when comparing its historical volatility, CAP LEASE AVIATION is 1.75 times less risky than Mereo BioPharma. The stock trades about -0.03 of its potential returns per unit of risk. The Mereo BioPharma Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 54.00 in Mereo BioPharma Group on September 12, 2024 and sell it today you would earn a total of 332.00 from holding Mereo BioPharma Group or generate 614.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.1% |
| Values | Daily Returns |
CAP LEASE AVIATION vs. Mereo BioPharma Group
Performance |
| Timeline |
| CAP LEASE AVIATION |
| Mereo BioPharma Group |
CAP LEASE and Mereo BioPharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAP LEASE and Mereo BioPharma
The main advantage of trading using opposite CAP LEASE and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAP LEASE 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.| CAP LEASE vs. Givaudan SA | CAP LEASE vs. Antofagasta PLC | CAP LEASE vs. Ferrexpo PLC | CAP LEASE vs. Atalaya Mining |
| Mereo BioPharma vs. Endeavour Mining Corp | Mereo BioPharma vs. Empire Metals Limited | Mereo BioPharma vs. Norman Broadbent Plc | Mereo BioPharma vs. EVS Broadcast Equipment |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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