Correlation Between Datagroup and Monks Investment

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

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

Diversification Opportunities for Datagroup and Monks Investment

0.01

Correlation Coefficient

Datagroup  Monks Investment

Significant diversification

The 3 months correlation between Datagroup and Monks is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Datagroup SE 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 Datagroup 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 Datagroup SE 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 Datagroup i.e., Datagroup and Monks Investment go up and down completely randomly.

Pair Corralation between Datagroup and Monks Investment

Assuming the 90 days trading horizon Datagroup SE is expected to under-perform the Monks Investment. In addition to that, Datagroup is 1.89 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 -0.06 per unit of volatility. If you would invest  126,800  in Monks Investment Trust on December 24, 2024 and sell it today you would lose (6,800) from holding Monks Investment Trust or give up 5.36% of portfolio value over 90 days.

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

Datagroup SE  vs.  Monks Investment Trust

Datagroup SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Datagroup SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Datagroup is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Monks Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monks Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monks Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Datagroup and Monks Investment

The main advantage of trading using opposite Datagroup and Monks Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datagroup 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 Datagroup SE 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.