Correlation Between Mereo BioPharma and Fortress Biotech
Can any of the company-specific risk be diversified away by investing in both Mereo BioPharma and Fortress Biotech 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 Fortress Biotech 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 Fortress Biotech, you can compare the effects of market volatilities on Mereo BioPharma and Fortress Biotech 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 Fortress Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mereo BioPharma and Fortress Biotech.
Diversification Opportunities for Mereo BioPharma and Fortress Biotech
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mereo and Fortress is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech 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 Fortress Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Biotech has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Fortress Biotech go up and down completely randomly.
Pair Corralation between Mereo BioPharma and Fortress Biotech
Given the investment horizon of 90 days Mereo BioPharma Group is expected to generate 0.76 times more return on investment than Fortress Biotech. However, Mereo BioPharma Group is 1.32 times less risky than Fortress Biotech. It trades about 0.08 of its potential returns per unit of risk. Fortress Biotech is currently generating about -0.02 per unit of risk. If you would invest 80.00 in Mereo BioPharma Group on August 29, 2024 and sell it today you would earn a total of 260.00 from holding Mereo BioPharma Group or generate 325.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mereo BioPharma Group vs. Fortress Biotech
Performance |
| Timeline |
| Mereo BioPharma Group |
| Fortress Biotech |
Mereo BioPharma and Fortress Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mereo BioPharma and Fortress Biotech
The main advantage of trading using opposite Mereo BioPharma and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mereo BioPharma position performs unexpectedly, Fortress Biotech 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 Fortress Biotech will offset losses from the drop in Fortress Biotech's long position.| Mereo BioPharma vs. Eliem Therapeutics | Mereo BioPharma vs. Scpharmaceuticals | Mereo BioPharma vs. Milestone Pharmaceuticals | Mereo BioPharma vs. Seres Therapeutics |
| Fortress Biotech vs. Mustang Bio | Fortress Biotech vs. Achilles Therapeutics PLC | Fortress Biotech vs. Aptose Biosciences | Fortress Biotech vs. Fortress Biotech Pref |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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