Correlation Between Esperion Therapeutics and Mereo BioPharma

Can any of the company-specific risk be diversified away by investing in both Esperion Therapeutics 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 Esperion Therapeutics and Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Esperion Therapeutics and Mereo BioPharma Group, you can compare the effects of market volatilities on Esperion Therapeutics 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 Esperion Therapeutics with a short position of Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esperion Therapeutics and Mereo BioPharma.

Diversification Opportunities for Esperion Therapeutics and Mereo BioPharma

-0.52

Correlation Coefficient

Esperion Therapeutics  Mereo BioPharma

Excellent diversification

The 3 months correlation between Esperion and Mereo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Esperion Therapeutics 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 Esperion Therapeutics 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 Esperion Therapeutics 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 Esperion Therapeutics i.e., Esperion Therapeutics and Mereo BioPharma go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Mereo BioPharma

Given the investment horizon of 90 days Esperion Therapeutics is expected to under-perform the Mereo BioPharma. In addition to that, Esperion Therapeutics is 1.03 times more volatile than Mereo BioPharma Group. It trades about -0.02 of its total potential returns per unit of risk. Mereo BioPharma Group is currently generating about 0.08 per unit of volatility. If you would invest  408.00  in Mereo BioPharma Group on June 16, 2024 and sell it today you would earn a total of  20.00  from holding Mereo BioPharma Group or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Esperion Therapeutics  vs.  Mereo BioPharma Group

Esperion Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Esperion Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in October 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Mereo BioPharma Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mereo BioPharma Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Mereo BioPharma is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Esperion Therapeutics and Mereo BioPharma

The main advantage of trading using opposite Esperion Therapeutics and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esperion Therapeutics 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 Esperion Therapeutics 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.