Correlation Between IT Tech and Mondi PLC

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

By analyzing existing cross correlation between IT Tech Packaging and Mondi PLC ADR, you can compare the effects of market volatilities on IT Tech and Mondi PLC 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 IT Tech with a short position of Mondi PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of IT Tech and Mondi PLC.

Diversification Opportunities for IT Tech and Mondi PLC

0.62

Correlation Coefficient

IT Tech  Mondi PLC

Poor diversification

The 3 months correlation between ITP and Mondi is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding IT Tech Packaging and Mondi PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondi PLC ADR and IT Tech 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 IT Tech Packaging are associated (or correlated) with Mondi PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondi PLC ADR has no effect on the direction of IT Tech i.e., IT Tech and Mondi PLC go up and down completely randomly.

Pair Corralation between IT Tech and Mondi PLC

Considering the 90-day investment horizon IT Tech Packaging is expected to generate 2.39 times more return on investment than Mondi PLC. However, IT Tech is 2.39 times more volatile than Mondi PLC ADR. It trades about 0.0 of its potential returns per unit of risk. Mondi PLC ADR is currently generating about -0.07 per unit of risk. If you would invest  23.00  in IT Tech Packaging on September 15, 2024 and sell it today you would lose (3.00) from holding IT Tech Packaging or give up 13.04% of portfolio value over 90 days.

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

IT Tech Packaging  vs.  Mondi PLC ADR

IT Tech Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IT Tech Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Mondi PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondi PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IT Tech and Mondi PLC

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

The idea behind IT Tech Packaging and Mondi PLC ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.