Correlation Between Monks Investment and Marstons PLC

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

Diversification Opportunities for Monks Investment and Marstons PLC

-0.06

Correlation Coefficient

Monks Investment  Marstons PLC

Good diversification

The 3 months correlation between Monks and Marstons is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of Monks Investment i.e., Monks Investment and Marstons PLC go up and down completely randomly.

Pair Corralation between Monks Investment and Marstons PLC

Assuming the 90 days trading horizon Monks Investment is expected to generate 1.37 times less return on investment than Marstons PLC. But when comparing it to its historical volatility, Monks Investment Trust is 3.16 times less risky than Marstons PLC. It trades about 0.16 of its potential returns per unit of risk. Marstons PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,990  in Marstons PLC on September 25, 2024 and sell it today you would earn a total of  415.00  from holding Marstons PLC or generate 10.4% return on investment over 90 days.

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

Monks Investment Trust  vs.  Marstons PLC

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 January 2025.

Marstons PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marstons PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Marstons PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monks Investment and Marstons PLC

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

The idea behind Monks Investment Trust and Marstons 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.