Correlation Between MONA and Ontology

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

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

Diversification Opportunities for MONA and Ontology

0.49

Correlation Coefficient

MONA  Ontology

Very weak diversification

The 3 months correlation between MONA and Ontology is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding MONA and Ontology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ontology 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 Ontology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ontology has no effect on the direction of MONA i.e., MONA and Ontology go up and down completely randomly.

Pair Corralation between MONA and Ontology

Assuming the 90 days trading horizon MONA is expected to generate 4.34 times less return on investment than Ontology. But when comparing it to its historical volatility, MONA is 1.16 times less risky than Ontology. It trades about 0.02 of its potential returns per unit of risk. Ontology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Ontology on January 30, 2024 and sell it today you would earn a total of  18.00  from holding Ontology or generate 100.0% return on investment over 90 days.

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

MONA  vs.  Ontology

MONA

Risk-Adjusted Performance

0 of 100

Weak

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

Ontology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ontology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ontology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MONA and Ontology

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

The idea behind MONA and Ontology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.