Correlation Between Mereo BioPharma and DecisionPoint Systems

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

Diversification Opportunities for Mereo BioPharma and DecisionPoint Systems

-0.37

Correlation Coefficient

Mereo BioPharma  DecisionPoint Systems

Very good diversification

The 3 months correlation between Mereo and DecisionPoint is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mereo BioPharma Group and DecisionPoint Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DecisionPoint Systems 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 DecisionPoint Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DecisionPoint Systems has no effect on the direction of Mereo BioPharma i.e., Mereo BioPharma and DecisionPoint Systems go up and down completely randomly.

Pair Corralation between Mereo BioPharma and DecisionPoint Systems

Given the investment horizon of 90 days Mereo BioPharma Group is expected to under-perform the DecisionPoint Systems. In addition to that, Mereo BioPharma is 1.31 times more volatile than DecisionPoint Systems. It trades about -0.06 of its total potential returns per unit of risk. DecisionPoint Systems is currently generating about -0.08 per unit of volatility. If you would invest  895.00  in DecisionPoint Systems on January 25, 2024 and sell it today you would lose (48.00) from holding DecisionPoint Systems or give up 5.36% of portfolio value over 90 days.

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

Mereo BioPharma Group  vs.  DecisionPoint Systems

Mereo BioPharma Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mereo BioPharma Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

DecisionPoint Systems

Risk-Adjusted Performance

11 of 100

OK

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

Pair Trading with Mereo BioPharma and DecisionPoint Systems

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

The idea behind Mereo BioPharma Group and DecisionPoint Systems 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.