Correlation Between Eli Lilly and Mereo BioPharma
Can any of the company-specific risk be diversified away by investing in both Eli Lilly 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 Eli Lilly and Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eli Lilly and and Mereo BioPharma Group, you can compare the effects of market volatilities on Eli Lilly 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 Eli Lilly with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Mereo BioPharma.
Diversification Opportunities for Eli Lilly and Mereo BioPharma
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eli and Mereo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and 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 Eli Lilly 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 Eli Lilly and 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 Eli Lilly i.e., Eli Lilly and Mereo BioPharma go up and down completely randomly.
Pair Corralation between Eli Lilly and Mereo BioPharma
Considering the 90-day investment horizon Eli Lilly is expected to generate 1.47 times less return on investment than Mereo BioPharma. But when comparing it to its historical volatility, Eli Lilly and is 2.38 times less risky than Mereo BioPharma. It trades about 0.1 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 122.00 in Mereo BioPharma Group on November 5, 2024 and sell it today you would earn a total of 179.00 from holding Mereo BioPharma Group or generate 146.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eli Lilly and vs. Mereo BioPharma Group
Performance |
| Timeline |
| Eli Lilly |
| Mereo BioPharma Group |
Eli Lilly and Mereo BioPharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and Mereo BioPharma
The main advantage of trading using opposite Eli Lilly and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly 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.| Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Bristol Myers Squibb | Eli Lilly vs. AbbVie Inc | Eli Lilly vs. Pfizer Inc |
| Mereo BioPharma vs. Terns Pharmaceuticals | Mereo BioPharma vs. PDS Biotechnology Corp | Mereo BioPharma vs. Inozyme Pharma | Mereo BioPharma vs. Hookipa Pharma |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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