Correlation Between Passage Bio and Monte Rosa

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

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

Diversification Opportunities for Passage Bio and Monte Rosa

-0.15

Correlation Coefficient

Passage Bio  Monte Rosa

Good diversification

The 3 months correlation between Passage and Monte is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio 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 Passage Bio 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 Passage Bio 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 Passage Bio i.e., Passage Bio and Monte Rosa go up and down completely randomly.

Pair Corralation between Passage Bio and Monte Rosa

Given the investment horizon of 90 days Passage Bio is expected to generate 5.82 times less return on investment than Monte Rosa. But when comparing it to its historical volatility, Passage Bio is 1.85 times less risky than Monte Rosa. It trades about 0.04 of its potential returns per unit of risk. Monte Rosa Therapeutics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  582.00  in Monte Rosa Therapeutics on August 31, 2024 and sell it today you would earn a total of  454.00  from holding Monte Rosa Therapeutics or generate 78.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Passage Bio  vs.  Monte Rosa Therapeutics

Passage Bio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Passage Bio reported solid returns over the last few months and may actually be approaching a breakup point.

Monte Rosa Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monte Rosa Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Monte Rosa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Passage Bio and Monte Rosa

The main advantage of trading using opposite Passage Bio and Monte Rosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Passage Bio 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 Passage Bio 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.