Correlation Between Franklin FTSE and Mereo BioPharma
Can any of the company-specific risk be diversified away by investing in both Franklin FTSE 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 Franklin FTSE and Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin FTSE Brazil and Mereo BioPharma Group, you can compare the effects of market volatilities on Franklin FTSE 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 Franklin FTSE with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and Mereo BioPharma.
Diversification Opportunities for Franklin FTSE and Mereo BioPharma
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Mereo is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil 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 Franklin FTSE 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 Franklin FTSE Brazil 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 Franklin FTSE i.e., Franklin FTSE and Mereo BioPharma go up and down completely randomly.
Pair Corralation between Franklin FTSE and Mereo BioPharma
Assuming the 90 days trading horizon Franklin FTSE Brazil is expected to generate 0.38 times more return on investment than Mereo BioPharma. However, Franklin FTSE Brazil is 2.67 times less risky than Mereo BioPharma. It trades about -0.12 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about -0.14 per unit of risk. If you would invest 1,826 in Franklin FTSE Brazil on September 1, 2024 and sell it today you would lose (91.00) from holding Franklin FTSE Brazil or give up 4.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin FTSE Brazil vs. Mereo BioPharma Group
Performance |
| Timeline |
| Franklin FTSE Brazil |
| Mereo BioPharma Group |
Franklin FTSE and Mereo BioPharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin FTSE and Mereo BioPharma
The main advantage of trading using opposite Franklin FTSE and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin FTSE 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.| Franklin FTSE vs. iShares Treasury Bond | Franklin FTSE vs. iShares Treasury Bond | Franklin FTSE vs. Amundi Treasury Bond | Franklin FTSE vs. SPDR Barclays 10 |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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