Correlation Between Monte Rosa and Lyell Immunopharma

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

Diversification Opportunities for Monte Rosa and Lyell Immunopharma

-0.35

Correlation Coefficient

Monte Rosa  Lyell Immunopharma

Very good diversification

The 3 months correlation between Monte and Lyell is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Monte Rosa Therapeutics and Lyell Immunopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyell Immunopharma 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 Lyell Immunopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyell Immunopharma has no effect on the direction of Monte Rosa i.e., Monte Rosa and Lyell Immunopharma go up and down completely randomly.

Pair Corralation between Monte Rosa and Lyell Immunopharma

Given the investment horizon of 90 days Monte Rosa Therapeutics is expected to generate 1.78 times more return on investment than Lyell Immunopharma. However, Monte Rosa is 1.78 times more volatile than Lyell Immunopharma. It trades about 0.1 of its potential returns per unit of risk. Lyell Immunopharma is currently generating about -0.06 per unit of risk. If you would invest  582.00  in Monte Rosa Therapeutics on August 31, 2024 and sell it today you would earn a total of  329.00  from holding Monte Rosa Therapeutics or generate 56.53% return on investment over 90 days.

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

Monte Rosa Therapeutics  vs.  Lyell Immunopharma

Monte Rosa Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monte Rosa Therapeutics are ranked lower than 7 (%) 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.

Lyell Immunopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyell Immunopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Monte Rosa and Lyell Immunopharma

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

The idea behind Monte Rosa Therapeutics and Lyell Immunopharma 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.