Correlation Between MONA and Big Time

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

By analyzing existing cross correlation between MONA and Big Time, you can compare the effects of market volatilities on MONA and Big Time 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 MONA with a short position of Big Time. Check out your portfolio center. Please also check ongoing floating volatility patterns of MONA and Big Time.

Diversification Opportunities for MONA and Big Time

-0.07

Correlation Coefficient

MONA  Big Time

Good diversification

The 3 months correlation between MONA and Big is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding MONA and Big Time in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Time and MONA 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 MONA are associated (or correlated) with Big Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Time has no effect on the direction of MONA i.e., MONA and Big Time go up and down completely randomly.

Pair Corralation between MONA and Big Time

Assuming the 90 days trading horizon MONA is expected to generate 4.75 times less return on investment than Big Time. But when comparing it to its historical volatility, MONA is 2.35 times less risky than Big Time. It trades about 0.09 of its potential returns per unit of risk. Big Time is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  6.57  in Big Time on September 1, 2024 and sell it today you would earn a total of  10.43  from holding Big Time or generate 158.75% return on investment over 90 days.

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

MONA  vs.  Big Time

MONA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MONA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, MONA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Big Time

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Big Time are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Big Time exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MONA and Big Time

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

The idea behind MONA and Big Time 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.