Correlation Between Compania Cervecerias and Mereo Biopharma

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Can any of the company-specific risk be diversified away by investing in both Compania Cervecerias 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 Compania Cervecerias and Mereo Biopharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania Cervecerias Unidas and Mereo Biopharma Group, you can compare the effects of market volatilities on Compania Cervecerias 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 Compania Cervecerias with a short position of Mereo Biopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Cervecerias and Mereo Biopharma.

Diversification Opportunities for Compania Cervecerias and Mereo Biopharma

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Compania and Mereo is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas 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 Compania Cervecerias 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 Compania Cervecerias Unidas 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 Compania Cervecerias i.e., Compania Cervecerias and Mereo Biopharma go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Mereo Biopharma

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to under-perform the Mereo Biopharma. But the stock apears to be less risky and, when comparing its historical volatility, Compania Cervecerias Unidas is 3.7 times less risky than Mereo Biopharma. The stock trades about -0.03 of its potential returns per unit of risk. The Mereo Biopharma Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  299.00  in Mereo Biopharma Group on May 21, 2022 and sell it today you would lose (178.00)  from holding Mereo Biopharma Group or give up 59.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Compania Cervecerias Unidas  vs.  Mereo Biopharma Group

 Performance (%) 
       Timeline  
Compania Cervecerias 
Compania Performance
0 of 100
Over the last 90 days Compania Cervecerias Unidas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in September 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Compania Price Channel

Mereo Biopharma Group 
Mereo Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mereo Biopharma Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Mereo Biopharma disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mereo Price Channel

Compania Cervecerias and Mereo Biopharma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Compania Cervecerias and Mereo Biopharma

The main advantage of trading using opposite Compania Cervecerias and Mereo Biopharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania Cervecerias 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 Compania Cervecerias Unidas 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 Group

Pair trading matchups for Mereo Biopharma

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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