Correlation Between Mereo BioPharma and Keros Therapeutics

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

Diversification Opportunities for Mereo BioPharma and Keros Therapeutics

0.16

Correlation Coefficient

Mereo BioPharma  Keros Therapeutics

Average diversification

The 3 months correlation between Mereo and Keros is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and Keros Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keros 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 Keros Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keros Therapeutics has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and Keros Therapeutics go up and down completely randomly.

Pair Corralation between Mereo BioPharma and Keros Therapeutics

Given the investment horizon of 90 days Mereo BioPharma Group is expected to generate 1.48 times more return on investment than Keros Therapeutics. However, Mereo BioPharma is 1.48 times more volatile than Keros Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Keros Therapeutics is currently generating about 0.03 per unit of risk. If you would invest  100.00  in Mereo BioPharma Group on July 20, 2024 and sell it today you would earn a total of  356.00  from holding Mereo BioPharma Group or generate 356.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Mereo BioPharma Group  vs.  Keros Therapeutics

Mereo BioPharma Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mereo BioPharma Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Mereo BioPharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Keros Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Keros Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Keros Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mereo BioPharma and Keros Therapeutics

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

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