Correlation Between Shrapnel and MONA

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

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

Diversification Opportunities for Shrapnel and MONA

0.15

Correlation Coefficient

Shrapnel  MONA

Average diversification

The 3 months correlation between Shrapnel and MONA is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Shrapnel and MONA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MONA and Shrapnel 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 Shrapnel are associated (or correlated) with MONA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MONA has no effect on the direction of Shrapnel i.e., Shrapnel and MONA go up and down completely randomly.

Pair Corralation between Shrapnel and MONA

Assuming the 90 days trading horizon Shrapnel is expected to under-perform the MONA. In addition to that, Shrapnel is 2.98 times more volatile than MONA. It trades about -0.1 of its total potential returns per unit of risk. MONA is currently generating about -0.11 per unit of volatility. If you would invest  38.00  in MONA on January 30, 2024 and sell it today you would lose (4.00) from holding MONA or give up 10.53% of portfolio value over 90 days.

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

Shrapnel  vs.  MONA

Shrapnel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shrapnel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Shrapnel exhibited solid returns over the last few months and may actually be approaching a breakup point.

MONA

Risk-Adjusted Performance

0 of 100

Very 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.

Pair Trading with Shrapnel and MONA

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

The idea behind Shrapnel and MONA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.