Correlation Between Mereo BioPharma and Stoke Therapeutics
Can any of the company-specific risk be diversified away by investing in both Mereo BioPharma and Stoke Therapeutics 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 Stoke Therapeutics 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 Stoke Therapeutics, you can compare the effects of market volatilities on Mereo BioPharma and Stoke Therapeutics 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 Stoke Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mereo BioPharma and Stoke Therapeutics.
Diversification Opportunities for Mereo BioPharma and Stoke Therapeutics
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mereo and Stoke is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Stoke Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoke Therapeutics 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 Stoke Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoke Therapeutics has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Stoke Therapeutics go up and down completely randomly.
Pair Corralation between Mereo BioPharma and Stoke Therapeutics
Given the investment horizon of 90 days Mereo BioPharma Group is expected to under-perform the Stoke Therapeutics. In addition to that, Mereo BioPharma is 1.09 times more volatile than Stoke Therapeutics. It trades about -0.24 of its total potential returns per unit of risk. Stoke Therapeutics is currently generating about -0.04 per unit of volatility. If you would invest 1,231 in Stoke Therapeutics on August 28, 2024 and sell it today you would lose (53.00) from holding Stoke Therapeutics or give up 4.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mereo BioPharma Group vs. Stoke Therapeutics
Performance |
| Timeline |
| Mereo BioPharma Group |
| Stoke Therapeutics |
Mereo BioPharma and Stoke Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mereo BioPharma and Stoke Therapeutics
The main advantage of trading using opposite Mereo BioPharma and Stoke Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mereo BioPharma position performs unexpectedly, Stoke Therapeutics 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 Stoke Therapeutics will offset losses from the drop in Stoke Therapeutics' long position.| Mereo BioPharma vs. Terns Pharmaceuticals | Mereo BioPharma vs. PDS Biotechnology Corp | Mereo BioPharma vs. Inozyme Pharma | Mereo BioPharma vs. Hookipa Pharma |
| Stoke Therapeutics vs. Adaptimmune Therapeutics Plc | Stoke Therapeutics vs. Black Diamond Therapeutics | Stoke Therapeutics vs. Relay Therapeutics | Stoke Therapeutics vs. Pliant Therapeutics |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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