Correlation Between Monopar Therapeutics and Spero Therapeutics

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

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

Diversification Opportunities for Monopar Therapeutics and Spero Therapeutics

0.36

Correlation Coefficient

Monopar Therapeutics  Spero Therapeutics

Weak diversification

The 3 months correlation between Monopar and Spero is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monopar Therapeutics and Spero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spero Therapeutics and Monopar Therapeutics 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 Monopar Therapeutics are associated (or correlated) with Spero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spero Therapeutics has no effect on the direction of Monopar Therapeutics i.e., Monopar Therapeutics and Spero Therapeutics go up and down completely randomly.

Pair Corralation between Monopar Therapeutics and Spero Therapeutics

Given the investment horizon of 90 days Monopar Therapeutics is expected to generate 1.7 times more return on investment than Spero Therapeutics. However, Monopar Therapeutics is 1.7 times more volatile than Spero Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Spero Therapeutics is currently generating about -0.12 per unit of risk. If you would invest  64.00  in Monopar Therapeutics on February 3, 2024 and sell it today you would earn a total of  2.00  from holding Monopar Therapeutics or generate 3.13% return on investment over 90 days.

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

Monopar Therapeutics  vs.  Spero Therapeutics

Monopar Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monopar Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Monopar Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Spero Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spero Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Spero Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monopar Therapeutics and Spero Therapeutics

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

The idea behind Monopar Therapeutics and Spero 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.