This compass points to the nearest Eldritch Monolith that is closed.
Is usually found in the secondary rooms of the monoliths. Nobody knows how to make it.
If used for research, it may give you a Fragment of Lost Knowledge.
The compass normally doesn't point to anywhere but keep 'searching' for monoliths or obelisks, if you explore enough terrains sometimes, the compass points in a fixed direction where a monolith is placed.
See also: Eldritch Keystone: Tlhutlh