Correlation Between 4D Molecular and Compass Pathways

Can any of the company-specific risk be diversified away by investing in both 4D Molecular and Compass Pathways 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 4D Molecular and Compass Pathways into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 4D Molecular Therapeutics and Compass Pathways Plc, you can compare the effects of market volatilities on 4D Molecular and Compass Pathways 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 4D Molecular with a short position of Compass Pathways. Check out your portfolio center. Please also check ongoing floating volatility patterns of 4D Molecular and Compass Pathways.

Diversification Opportunities for 4D Molecular and Compass Pathways

0.61

Correlation Coefficient

4D Molecular  Compass Pathways

Poor diversification

The 3 months correlation between FDMT and Compass is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding 4D Molecular Therapeutics and Compass Pathways Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Pathways Plc and 4D Molecular 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 4D Molecular Therapeutics are associated (or correlated) with Compass Pathways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Pathways Plc has no effect on the direction of 4D Molecular i.e., 4D Molecular and Compass Pathways go up and down completely randomly.

Pair Corralation between 4D Molecular and Compass Pathways

Given the investment horizon of 90 days 4D Molecular Therapeutics is expected to generate 1.22 times more return on investment than Compass Pathways. However, 4D Molecular is 1.22 times more volatile than Compass Pathways Plc. It trades about 0.21 of its potential returns per unit of risk. Compass Pathways Plc is currently generating about 0.1 per unit of risk. If you would invest  614.00  in 4D Molecular Therapeutics on September 1, 2025 and sell it today you would earn a total of  552.00  from holding 4D Molecular Therapeutics or generate 89.9% return on investment over 90 days.

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

4D Molecular Therapeutics  vs.  Compass Pathways Plc

4D Molecular Therapeutics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 4D Molecular Therapeutics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady primary indicators, 4D Molecular unveiled solid returns over the last few months and may actually be approaching a breakup point.

Compass Pathways Plc

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Pathways Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Compass Pathways unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 4D Molecular and Compass Pathways

The main advantage of trading using opposite 4D Molecular and Compass Pathways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 4D Molecular position performs unexpectedly, Compass Pathways 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 Pathways will offset losses from the drop in Compass Pathways' long position.

The idea behind 4D Molecular Therapeutics and Compass Pathways Plc 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.