Correlation Between Aurora Investment and Monks Investment

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

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

Diversification Opportunities for Aurora Investment and Monks Investment

-0.89

Correlation Coefficient

Aurora Investment  Monks Investment

Pay attention - limited upside

The 3 months correlation between Aurora and Monks is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Investment Trust 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 Aurora Investment 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 Aurora Investment Trust 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 Aurora Investment i.e., Aurora Investment and Monks Investment go up and down completely randomly.

Pair Corralation between Aurora Investment and Monks Investment

Assuming the 90 days trading horizon Aurora Investment Trust is expected to under-perform the Monks Investment. In addition to that, Aurora Investment is 1.42 times more volatile than Monks Investment Trust. It trades about -0.13 of its total potential returns per unit of risk. Monks Investment Trust is currently generating about 0.25 per unit of volatility. If you would invest  113,600  in Monks Investment Trust on September 14, 2024 and sell it today you would earn a total of  15,800  from holding Monks Investment Trust or generate 13.91% return on investment over 90 days.

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

Aurora Investment Trust  vs.  Monks Investment Trust

Aurora Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Monks Investment Trust

Risk-Adjusted Performance

19 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Investment and Monks Investment

The main advantage of trading using opposite Aurora Investment and Monks Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Investment 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 Aurora Investment Trust 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.