Correlation Between Cognition Therapeutics and Mersana Therapeutics

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

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

Diversification Opportunities for Cognition Therapeutics and Mersana Therapeutics

-0.63

Correlation Coefficient

Cognition Therapeutics  Mersana Therapeutics

Excellent diversification

The 3 months correlation between Cognition and Mersana is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cognition Therapeutics and Mersana Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mersana Therapeutics and Cognition 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 Cognition Therapeutics are associated (or correlated) with Mersana Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mersana Therapeutics has no effect on the direction of Cognition Therapeutics i.e., Cognition Therapeutics and Mersana Therapeutics go up and down completely randomly.

Pair Corralation between Cognition Therapeutics and Mersana Therapeutics

Given the investment horizon of 90 days Cognition Therapeutics is expected to generate 1.47 times more return on investment than Mersana Therapeutics. However, Cognition Therapeutics is 1.47 times more volatile than Mersana Therapeutics. It trades about 0.32 of its potential returns per unit of risk. Mersana Therapeutics is currently generating about -0.44 per unit of risk. If you would invest  46.00  in Cognition Therapeutics on October 8, 2024 and sell it today you would earn a total of  30.00  from holding Cognition Therapeutics or generate 65.22% return on investment over 90 days.

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

Cognition Therapeutics  vs.  Mersana Therapeutics

Cognition Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cognition Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cognition Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Mersana Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mersana Therapeutics 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 basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cognition Therapeutics and Mersana Therapeutics

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

The idea behind Cognition Therapeutics and Mersana 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.