Correlation Between Cairo Communication and Monks Investment

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

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

Diversification Opportunities for Cairo Communication and Monks Investment

0.67

Correlation Coefficient

Cairo Communication  Monks Investment

Poor diversification

The 3 months correlation between Cairo and Monks is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment Trust and Cairo Communication 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 Cairo Communication SpA are associated (or correlated) with Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Cairo Communication i.e., Cairo Communication and Monks Investment go up and down completely randomly.

Pair Corralation between Cairo Communication and Monks Investment

Assuming the 90 days trading horizon Cairo Communication SpA is expected to under-perform the Monks Investment. In addition to that, Cairo Communication is 1.53 times more volatile than Monks Investment Trust. It trades about -0.03 of its total potential returns per unit of risk. Monks Investment Trust is currently generating about 0.0 per unit of volatility. If you would invest  127,200  in Monks Investment Trust on October 11, 2024 and sell it today you would lose (200.00) from holding Monks Investment Trust or give up 0.16% of portfolio value over 90 days.

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

Cairo Communication SpA  vs.  Monks Investment Trust

Cairo Communication SpA

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cairo Communication may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Monks Investment Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 9 (%) 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 February 2025.

Pair Trading with Cairo Communication and Monks Investment

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

The idea behind Cairo Communication SpA and Monks Investment Trust 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.