Correlation Between Monks Investment and Aeorema Communications

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

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

Diversification Opportunities for Monks Investment and Aeorema Communications

0.51

Correlation Coefficient

Monks Investment  Aeorema Communications

Very weak diversification

The 3 months correlation between Monks and Aeorema is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and Monks 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 Monks Investment Trust are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Monks Investment i.e., Monks Investment and Aeorema Communications go up and down completely randomly.

Pair Corralation between Monks Investment and Aeorema Communications

Assuming the 90 days trading horizon Monks Investment is expected to generate 1.39 times less return on investment than Aeorema Communications. But when comparing it to its historical volatility, Monks Investment Trust is 1.63 times less risky than Aeorema Communications. It trades about 0.14 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,182  in Aeorema Communications Plc on September 27, 2024 and sell it today you would earn a total of  518.00  from holding Aeorema Communications Plc or generate 10.0% return on investment over 90 days.

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

Monks Investment Trust  vs.  Aeorema Communications Plc

Monks Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 10 (%) 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 January 2025.

Aeorema Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeorema Communications Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Aeorema Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monks Investment and Aeorema Communications

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

The idea behind Monks Investment Trust and Aeorema Communications 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.