Correlation Between Ford and Mereo BioPharma
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Mereo BioPharma Group, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Mereo BioPharma.
Diversification Opportunities for Ford and Mereo BioPharma
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Mereo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Mereo BioPharma go up and down completely randomly.
Pair Corralation between Ford and Mereo BioPharma
Taking into account the 90-day investment horizon Ford is expected to generate 14.14 times less return on investment than Mereo BioPharma. But when comparing it to its historical volatility, Ford Motor is 1.81 times less risky than Mereo BioPharma. It trades about 0.01 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 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 | Insignificant |
| Accuracy | 98.28% |
| Values | Daily Returns |
Ford Motor vs. Mereo BioPharma Group
Performance |
| Timeline |
| Ford Motor |
| Mereo BioPharma Group |
Ford and Mereo BioPharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Mereo BioPharma
The main advantage of trading using opposite Ford and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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. Samsung Electronics Co | Mereo BioPharma vs. Samsung Electronics Co | Mereo BioPharma vs. Hyundai Motor | Mereo BioPharma vs. Toyota Motor Corp |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |