Correlation Between Mereo Biopharma and NetApp

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Can any of the company-specific risk be diversified away by investing in both Mereo Biopharma and NetApp 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 NetApp 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 NetApp Inc, you can compare the effects of market volatilities on Mereo Biopharma and NetApp 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 NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mereo Biopharma and NetApp.

Diversification Opportunities for Mereo Biopharma and NetApp

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Mereo and NetApp is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Mereo Biopharma Group and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Mereo Biopharma i.e., Mereo Biopharma and NetApp go up and down completely randomly.

Pair Corralation between Mereo Biopharma and NetApp

Given the investment horizon of 90 days Mereo Biopharma is expected to generate 8.49 times less return on investment than NetApp. In addition to that, Mereo Biopharma is 3.28 times more volatile than NetApp Inc. It trades about 0.0 of its total potential returns per unit of risk. NetApp Inc is currently generating about 0.07 per unit of volatility. If you would invest  3,877  in NetApp Inc on May 10, 2022 and sell it today you would earn a total of  3,333  from holding NetApp Inc or generate 85.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Mereo Biopharma Group  vs.  NetApp Inc

 Performance (%) 
       Timeline  
Mereo Biopharma Group 
Mereo Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mereo Biopharma Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting 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

NetApp Inc 
NetApp Performance
0 of 100
Over the last 90 days NetApp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, NetApp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the insiders.

NetApp Price Channel

Mereo Biopharma and NetApp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mereo Biopharma and NetApp

The main advantage of trading using opposite Mereo Biopharma and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mereo Biopharma position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.

Mereo Biopharma Group

Pair trading matchups for Mereo Biopharma

The idea behind Mereo Biopharma Group and NetApp Inc 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.
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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