Correlation Between Monks Investment and Tatton Asset

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

Diversification Opportunities for Monks Investment and Tatton Asset

0.31

Correlation Coefficient

Monks Investment  Tatton Asset

Weak diversification

The 3 months correlation between Monks and Tatton is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Tatton Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tatton Asset Management 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 Tatton Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tatton Asset Management has no effect on the direction of Monks Investment i.e., Monks Investment and Tatton Asset go up and down completely randomly.

Pair Corralation between Monks Investment and Tatton Asset

Assuming the 90 days trading horizon Monks Investment is expected to generate 1.57 times less return on investment than Tatton Asset. But when comparing it to its historical volatility, Monks Investment Trust is 1.8 times less risky than Tatton Asset. It trades about 0.07 of its potential returns per unit of risk. Tatton Asset Management is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  43,682  in Tatton Asset Management on September 14, 2024 and sell it today you would earn a total of  25,318  from holding Tatton Asset Management or generate 57.96% return on investment over 90 days.

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

Monks Investment Trust  vs.  Tatton Asset Management

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.

Tatton Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tatton Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Tatton Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Monks Investment and Tatton Asset

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

The idea behind Monks Investment Trust and Tatton Asset Management 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.