Correlation Between Cogent Biosciences and Monte Rosa

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

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

Diversification Opportunities for Cogent Biosciences and Monte Rosa

-0.54

Correlation Coefficient

Cogent Biosciences  Monte Rosa

Excellent diversification

The 3 months correlation between Cogent and Monte is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Biosciences 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 Cogent Biosciences 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 Cogent Biosciences 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 Cogent Biosciences i.e., Cogent Biosciences and Monte Rosa go up and down completely randomly.

Pair Corralation between Cogent Biosciences and Monte Rosa

Given the investment horizon of 90 days Cogent Biosciences is expected to generate 0.53 times more return on investment than Monte Rosa. However, Cogent Biosciences is 1.9 times less risky than Monte Rosa. It trades about -0.14 of its potential returns per unit of risk. Monte Rosa Therapeutics is currently generating about -0.08 per unit of risk. If you would invest  1,040  in Cogent Biosciences on September 12, 2024 and sell it today you would lose (113.00) from holding Cogent Biosciences or give up 10.87% of portfolio value over 90 days.

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

Cogent Biosciences  vs.  Monte Rosa Therapeutics

Cogent Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Monte Rosa Therapeutics

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monte Rosa Therapeutics are ranked lower than 6 (%) 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 Cogent Biosciences and Monte Rosa

The main advantage of trading using opposite Cogent Biosciences and Monte Rosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Biosciences 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 Cogent Biosciences 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.