Correlation Between Associated Alcohols and Silly Monks

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

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

Diversification Opportunities for Associated Alcohols and Silly Monks

0.41

Correlation Coefficient

Associated Alcohols  Silly Monks

Very weak diversification

The 3 months correlation between Associated and Silly is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and Silly Monks Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silly Monks Entertainment and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with Silly Monks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silly Monks Entertainment has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and Silly Monks go up and down completely randomly.

Pair Corralation between Associated Alcohols and Silly Monks

Assuming the 90 days trading horizon Associated Alcohols is expected to generate 1.52 times less return on investment than Silly Monks. But when comparing it to its historical volatility, Associated Alcohols Breweries is 1.6 times less risky than Silly Monks. It trades about 0.17 of its potential returns per unit of risk. Silly Monks Entertainment is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,138  in Silly Monks Entertainment on October 12, 2024 and sell it today you would earn a total of  272.00  from holding Silly Monks Entertainment or generate 12.72% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  Silly Monks Entertainment

Associated Alcohols

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Silly Monks Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silly Monks Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Silly Monks is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Associated Alcohols and Silly Monks

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

The idea behind Associated Alcohols Breweries and Silly Monks Entertainment 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.