Correlation Between Monitor Ventures and Leading Edge

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

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

Diversification Opportunities for Monitor Ventures and Leading Edge

-0.73

Correlation Coefficient

Monitor Ventures  Leading Edge

Pay attention - limited upside

The 3 months correlation between Monitor and Leading is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Monitor Ventures and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Monitor Ventures 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 Monitor Ventures are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Monitor Ventures i.e., Monitor Ventures and Leading Edge go up and down completely randomly.

Pair Corralation between Monitor Ventures and Leading Edge

Assuming the 90 days horizon Monitor Ventures is expected to generate 0.16 times more return on investment than Leading Edge. However, Monitor Ventures is 6.1 times less risky than Leading Edge. It trades about 0.2 of its potential returns per unit of risk. Leading Edge Materials is currently generating about -0.04 per unit of risk. If you would invest  7.93  in Monitor Ventures on September 4, 2024 and sell it today you would earn a total of  1.07  from holding Monitor Ventures or generate 13.49% return on investment over 90 days.

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

Monitor Ventures  vs.  Leading Edge Materials

Monitor Ventures

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monitor Ventures are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Monitor Ventures reported solid returns over the last few months and may actually be approaching a breakup point.

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Monitor Ventures and Leading Edge

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

The idea behind Monitor Ventures and Leading Edge Materials 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.