Correlation Between Mereo Biopharma and Positive Physicians

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

Diversification Opportunities for Mereo Biopharma and Positive Physicians

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Mereo and Positive is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mereo Biopharma Group and Positive Physicians Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Positive Physicians 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 Positive Physicians. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Positive Physicians has no effect on the direction of Mereo Biopharma i.e., Mereo Biopharma and Positive Physicians go up and down completely randomly.

Pair Corralation between Mereo Biopharma and Positive Physicians

Given the investment horizon of 90 days Mereo Biopharma Group is expected to generate 1.6 times more return on investment than Positive Physicians. However, Mereo Biopharma is 1.6 times more volatile than Positive Physicians Holdings. It trades about 0.16 of its potential returns per unit of risk. Positive Physicians Holdings is currently generating about -0.02 per unit of risk. If you would invest  66.00  in Mereo Biopharma Group on May 11, 2022 and sell it today you would earn a total of  52.00  from holding Mereo Biopharma Group or generate 78.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy97.56%
ValuesDaily Returns

Mereo Biopharma Group  vs.  Positive Physicians Holdings

 Performance (%) 
       Timeline  
Mereo Biopharma Group 
Mereo Performance
17 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mereo Biopharma Group are ranked lower than 17 (%) 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

Positive Physicians 
Positive Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Positive Physicians Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Positive Physicians reported solid returns over the last few months and may actually be approaching a breakup point.

Positive Price Channel

Mereo Biopharma and Positive Physicians Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mereo Biopharma and Positive Physicians

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

Mereo Biopharma Group

Pair trading matchups for Mereo Biopharma

The idea behind Mereo Biopharma Group and Positive Physicians Holdings 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.

Positive Physicians Holdings

Pair trading matchups for Positive Physicians

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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