Correlation Between Monks Investment and Baltic Panamax

Can any of the company-specific risk be diversified away by investing in both Monks Investment and Baltic Panamax 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 Baltic Panamax 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 Baltic Panamax, you can compare the effects of market volatilities on Monks Investment and Baltic Panamax 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 Baltic Panamax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monks Investment and Baltic Panamax.

Diversification Opportunities for Monks Investment and Baltic Panamax

-0.87

Correlation Coefficient

Monks Investment  Baltic Panamax

Pay attention - limited upside

The 3 months correlation between Monks and Baltic is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Baltic Panamax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baltic Panamax 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 Baltic Panamax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baltic Panamax has no effect on the direction of Monks Investment i.e., Monks Investment and Baltic Panamax go up and down completely randomly.

Pair Corralation between Monks Investment and Baltic Panamax

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.43 times more return on investment than Baltic Panamax. However, Monks Investment Trust is 2.31 times less risky than Baltic Panamax. It trades about 0.23 of its potential returns per unit of risk. Baltic Panamax is currently generating about -0.29 per unit of risk. If you would invest  114,000  in Monks Investment Trust on September 18, 2024 and sell it today you would earn a total of  13,800  from holding Monks Investment Trust or generate 12.11% return on investment over 90 days.

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

Monks Investment Trust  vs.  Baltic Panamax

Pair Trading with Monks Investment and Baltic Panamax

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

The idea behind Monks Investment Trust and Baltic Panamax 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.