Correlation Between Liberty Media and Monks Investment

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

By analyzing existing cross correlation between Liberty Media Corp and Monks Investment Trust, you can compare the effects of market volatilities on Liberty Media and Monks Investment 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 Liberty Media with a short position of Monks Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Monks Investment.

Diversification Opportunities for Liberty Media and Monks Investment

0.85

Correlation Coefficient

Liberty Media  Monks Investment

Very poor diversification

The 3 months correlation between Liberty and Monks is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment Trust and Liberty Media 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 Liberty Media Corp are associated (or correlated) with Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Liberty Media i.e., Liberty Media and Monks Investment go up and down completely randomly.

Pair Corralation between Liberty Media and Monks Investment

Assuming the 90 days trading horizon Liberty Media Corp is expected to generate 1.59 times more return on investment than Monks Investment. However, Liberty Media is 1.59 times more volatile than Monks Investment Trust. It trades about 0.15 of its potential returns per unit of risk. Monks Investment Trust is currently generating about 0.16 per unit of risk. If you would invest  7,047  in Liberty Media Corp on August 30, 2024 and sell it today you would earn a total of  1,005  from holding Liberty Media Corp or generate 14.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Liberty Media Corp  vs.  Monks Investment Trust

Liberty Media Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Liberty Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Monks Investment Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Liberty Media and Monks Investment

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

The idea behind Liberty Media Corp and Monks Investment Trust 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.