Correlation Between Burnham Holdings and Monarch Cement

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

By analyzing existing cross correlation between Burnham Holdings and The Monarch Cement, you can compare the effects of market volatilities on Burnham Holdings and Monarch Cement 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 Burnham Holdings with a short position of Monarch Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burnham Holdings and Monarch Cement.

Diversification Opportunities for Burnham Holdings and Monarch Cement

-0.25

Correlation Coefficient

Burnham Holdings  Monarch Cement

Very good diversification

The 3 months correlation between Burnham and Monarch is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Burnham Holdings and The Monarch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch Cement and Burnham Holdings 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 Burnham Holdings are associated (or correlated) with Monarch Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Cement has no effect on the direction of Burnham Holdings i.e., Burnham Holdings and Monarch Cement go up and down completely randomly.

Pair Corralation between Burnham Holdings and Monarch Cement

Assuming the 90 days horizon Burnham Holdings is expected to generate 1.86 times less return on investment than Monarch Cement. In addition to that, Burnham Holdings is 1.34 times more volatile than The Monarch Cement. It trades about 0.04 of its total potential returns per unit of risk. The Monarch Cement is currently generating about 0.09 per unit of volatility. If you would invest  17,649  in The Monarch Cement on October 25, 2024 and sell it today you would earn a total of  4,951  from holding The Monarch Cement or generate 28.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.16%
Values	Daily Returns

Burnham Holdings  vs.  The Monarch Cement

Burnham Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burnham Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Burnham Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Monarch Cement

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Monarch Cement are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Monarch Cement displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burnham Holdings and Monarch Cement

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

The idea behind Burnham Holdings and The Monarch Cement 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.