Correlation Between Gear4music Plc and Monks Investment

Can any of the company-specific risk be diversified away by investing in both Gear4music Plc and Monks Investment 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 Gear4music Plc and Monks Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gear4music Plc and Monks Investment Trust, you can compare the effects of market volatilities on Gear4music Plc and Monks Investment 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 Gear4music Plc with a short position of Monks Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear4music Plc and Monks Investment.

Diversification Opportunities for Gear4music Plc and Monks Investment

-0.74

Correlation Coefficient

Gear4music Plc  Monks Investment

Pay attention - limited upside

The 3 months correlation between Gear4music and Monks is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gear4music Plc and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment Trust and Gear4music 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 Gear4music Plc are associated (or correlated) with Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Gear4music Plc i.e., Gear4music Plc and Monks Investment go up and down completely randomly.

Pair Corralation between Gear4music Plc and Monks Investment

Assuming the 90 days trading horizon Gear4music Plc is expected to generate 7.27 times less return on investment than Monks Investment. In addition to that, Gear4music Plc is 2.8 times more volatile than Monks Investment Trust. It trades about 0.01 of its total potential returns per unit of risk. Monks Investment Trust is currently generating about 0.22 per unit of volatility. If you would invest  118,400  in Monks Investment Trust on September 4, 2024 and sell it today you would earn a total of  9,400  from holding Monks Investment Trust or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Gear4music Plc  vs.  Monks Investment Trust

Gear4music Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Monks Investment Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gear4music Plc and Monks Investment

The main advantage of trading using opposite Gear4music Plc and Monks Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear4music Plc position performs unexpectedly, Monks Investment 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 Monks Investment will offset losses from the drop in Monks Investment's long position.

The idea behind Gear4music Plc and Monks Investment Trust 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.