Correlation Between ProMIS Neurosciences and Compass Therapeutics

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

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

Diversification Opportunities for ProMIS Neurosciences and Compass Therapeutics

-0.25

Correlation Coefficient

ProMIS Neurosciences  Compass Therapeutics

Very good diversification

The 3 months correlation between ProMIS and Compass is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding ProMIS Neurosciences and Compass Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Therapeutics and ProMIS Neurosciences 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 ProMIS Neurosciences are associated (or correlated) with Compass Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Therapeutics has no effect on the direction of ProMIS Neurosciences i.e., ProMIS Neurosciences and Compass Therapeutics go up and down completely randomly.

Pair Corralation between ProMIS Neurosciences and Compass Therapeutics

Considering the 90-day investment horizon ProMIS Neurosciences is expected to under-perform the Compass Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, ProMIS Neurosciences is 1.87 times less risky than Compass Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Compass Therapeutics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  151.00  in Compass Therapeutics on December 21, 2024 and sell it today you would earn a total of  73.00  from holding Compass Therapeutics or generate 48.34% return on investment over 90 days.

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

ProMIS Neurosciences  vs.  Compass Therapeutics

ProMIS Neurosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProMIS Neurosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary 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.

Compass Therapeutics

Risk-Adjusted Performance

OK

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

Pair Trading with ProMIS Neurosciences and Compass Therapeutics

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

The idea behind ProMIS Neurosciences and Compass 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.