Correlation Between Monte Rosa and Arcellx

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

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

Diversification Opportunities for Monte Rosa and Arcellx

0.6

Correlation Coefficient

Monte Rosa  Arcellx

Poor diversification

The 3 months correlation between Monte and Arcellx is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Monte Rosa Therapeutics and Arcellx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcellx and Monte Rosa 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 Monte Rosa Therapeutics are associated (or correlated) with Arcellx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcellx has no effect on the direction of Monte Rosa i.e., Monte Rosa and Arcellx go up and down completely randomly.

Pair Corralation between Monte Rosa and Arcellx

Given the investment horizon of 90 days Monte Rosa Therapeutics is expected to under-perform the Arcellx. In addition to that, Monte Rosa is 1.55 times more volatile than Arcellx. It trades about -0.08 of its total potential returns per unit of risk. Arcellx is currently generating about -0.06 per unit of volatility. If you would invest  7,835  in Arcellx on December 29, 2024 and sell it today you would lose (1,039) from holding Arcellx or give up 13.26% of portfolio value over 90 days.

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

Monte Rosa Therapeutics  vs.  Arcellx

Monte Rosa Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monte Rosa Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Arcellx

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcellx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Monte Rosa and Arcellx

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

The idea behind Monte Rosa Therapeutics and Arcellx 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.