Correlation Between Boohoo PLC and Monotaro

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

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

Diversification Opportunities for Boohoo PLC and Monotaro

0.6

Correlation Coefficient

Boohoo PLC  Monotaro

Poor diversification

The 3 months correlation between Boohoo and Monotaro is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BoohooCom PLC ADR and Monotaro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monotaro and Boohoo PLC 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 BoohooCom PLC ADR are associated (or correlated) with Monotaro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monotaro has no effect on the direction of Boohoo PLC i.e., Boohoo PLC and Monotaro go up and down completely randomly.

Pair Corralation between Boohoo PLC and Monotaro

Assuming the 90 days horizon BoohooCom PLC ADR is expected to under-perform the Monotaro. In addition to that, Boohoo PLC is 1.06 times more volatile than Monotaro Co. It trades about -0.01 of its total potential returns per unit of risk. Monotaro Co is currently generating about 0.03 per unit of volatility. If you would invest  1,418  in Monotaro Co on October 5, 2024 and sell it today you would earn a total of  261.00  from holding Monotaro Co or generate 18.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

BoohooCom PLC ADR  vs.  Monotaro Co

BoohooCom PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BoohooCom PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Boohoo PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Monotaro

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monotaro Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Monotaro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Boohoo PLC and Monotaro

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

The idea behind BoohooCom PLC ADR and Monotaro Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.