Correlation Between Monte Rosa and Day One

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

Diversification Opportunities for Monte Rosa and Day One

0.24

Correlation Coefficient

Monte Rosa  Day One

Modest diversification

The 3 months correlation between Monte and Day is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Monte Rosa Therapeutics and Day One Biopharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Day One Biopharmaceu 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 Day One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Day One Biopharmaceu has no effect on the direction of Monte Rosa i.e., Monte Rosa and Day One go up and down completely randomly.

Pair Corralation between Monte Rosa and Day One

Given the investment horizon of 90 days Monte Rosa Therapeutics is expected to generate 1.11 times more return on investment than Day One. However, Monte Rosa is 1.11 times more volatile than Day One Biopharmaceuticals. It trades about -0.07 of its potential returns per unit of risk. Day One Biopharmaceuticals is currently generating about -0.16 per unit of risk. If you would invest  722.00  in Monte Rosa Therapeutics on December 26, 2024 and sell it today you would lose (173.00) from holding Monte Rosa Therapeutics or give up 23.96% of portfolio value over 90 days.

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

Monte Rosa Therapeutics  vs.  Day One Biopharmaceuticals

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.

Day One Biopharmaceu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Day One Biopharmaceuticals 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 very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Monte Rosa and Day One

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

The idea behind Monte Rosa Therapeutics and Day One Biopharmaceuticals 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.