Correlation Between Biomea Fusion and Monte Rosa

Can any of the company-specific risk be diversified away by investing in both Biomea Fusion and Monte Rosa 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 Biomea Fusion and Monte Rosa into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Biomea Fusion and Monte Rosa

-0.44

Correlation Coefficient

Biomea Fusion  Monte Rosa

Very good diversification

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

Pair Corralation between Biomea Fusion and Monte Rosa

Given the investment horizon of 90 days Biomea Fusion is expected to under-perform the Monte Rosa. But the stock apears to be less risky and, when comparing its historical volatility, Biomea Fusion is 1.38 times less risky than Monte Rosa. The stock trades about -0.21 of its potential returns per unit of risk. The Monte Rosa Therapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  884.00  in Monte Rosa Therapeutics on September 4, 2024 and sell it today you would earn a total of  138.00  from holding Monte Rosa Therapeutics or generate 15.61% return on investment over 90 days.

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

Biomea Fusion  vs.  Monte Rosa Therapeutics

Biomea Fusion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomea Fusion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Biomea Fusion is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Monte Rosa Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monte Rosa Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Monte Rosa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biomea Fusion and Monte Rosa

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

The idea behind Biomea Fusion and Monte Rosa 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.