Correlation Between Monument Mining and IDP EDUCATION

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

By analyzing existing cross correlation between Monument Mining Limited and IDP EDUCATION LTD, you can compare the effects of market volatilities on Monument Mining and IDP EDUCATION 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 Monument Mining with a short position of IDP EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monument Mining and IDP EDUCATION.

Diversification Opportunities for Monument Mining and IDP EDUCATION

0.18

Correlation Coefficient

Monument Mining  IDP EDUCATION

Average diversification

The 3 months correlation between Monument and IDP is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Monument Mining Limited and IDP EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDP EDUCATION LTD and Monument Mining 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 Monument Mining Limited are associated (or correlated) with IDP EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDP EDUCATION LTD has no effect on the direction of Monument Mining i.e., Monument Mining and IDP EDUCATION go up and down completely randomly.

Pair Corralation between Monument Mining and IDP EDUCATION

Assuming the 90 days trading horizon Monument Mining Limited is expected to generate 0.92 times more return on investment than IDP EDUCATION. However, Monument Mining Limited is 1.09 times less risky than IDP EDUCATION. It trades about 0.1 of its potential returns per unit of risk. IDP EDUCATION LTD is currently generating about -0.02 per unit of risk. If you would invest  19.00  in Monument Mining Limited on December 21, 2024 and sell it today you would earn a total of  5.00  from holding Monument Mining Limited or generate 26.32% return on investment over 90 days.

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

Monument Mining Limited  vs.  IDP EDUCATION LTD

Monument Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monument Mining Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Monument Mining reported solid returns over the last few months and may actually be approaching a breakup point.

IDP EDUCATION LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days IDP EDUCATION LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IDP EDUCATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Monument Mining and IDP EDUCATION

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

The idea behind Monument Mining Limited and IDP EDUCATION LTD 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.