Correlation Between Monte Rosa and NewAmsterdam Pharma
Can any of the company-specific risk be diversified away by investing in both Monte Rosa and NewAmsterdam Pharma 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 NewAmsterdam Pharma 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 NewAmsterdam Pharma, you can compare the effects of market volatilities on Monte Rosa and NewAmsterdam Pharma 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 NewAmsterdam Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monte Rosa and NewAmsterdam Pharma.
Diversification Opportunities for Monte Rosa and NewAmsterdam Pharma
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monte and NewAmsterdam is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Monte Rosa Therapeutics and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma 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 NewAmsterdam Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewAmsterdam Pharma has no effect on the direction of Monte Rosa i.e., Monte Rosa and NewAmsterdam Pharma go up and down completely randomly.
Pair Corralation between Monte Rosa and NewAmsterdam Pharma
Given the investment horizon of 90 days Monte Rosa Therapeutics is expected to generate 3.48 times more return on investment than NewAmsterdam Pharma. However, Monte Rosa is 3.48 times more volatile than NewAmsterdam Pharma. It trades about 0.08 of its potential returns per unit of risk. NewAmsterdam Pharma is currently generating about 0.13 per unit of risk. If you would invest 639.00 in Monte Rosa Therapeutics on August 29, 2024 and sell it today you would earn a total of 221.00 from holding Monte Rosa Therapeutics or generate 34.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monte Rosa Therapeutics vs. NewAmsterdam Pharma
Performance |
| Timeline |
| Monte Rosa Therapeutics |
| NewAmsterdam Pharma |
Monte Rosa and NewAmsterdam Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monte Rosa and NewAmsterdam Pharma
The main advantage of trading using opposite Monte Rosa and NewAmsterdam Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monte Rosa position performs unexpectedly, NewAmsterdam Pharma 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 NewAmsterdam Pharma will offset losses from the drop in NewAmsterdam Pharma's long position.| Monte Rosa vs. Valneva SE ADR | Monte Rosa vs. Bright Minds Biosciences | Monte Rosa vs. HP Inc | Monte Rosa vs. Intel |
| NewAmsterdam Pharma vs. Valneva SE ADR | NewAmsterdam Pharma vs. Bright Minds Biosciences | NewAmsterdam Pharma vs. HP Inc | NewAmsterdam Pharma vs. Intel |
Check out your portfolio center.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.
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