Correlation Between Global Energy and Monitor Ventures

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

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

Diversification Opportunities for Global Energy and Monitor Ventures

-0.58

Correlation Coefficient

Global Energy  Monitor Ventures

Excellent diversification

The 3 months correlation between Global and Monitor is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global Energy Metals and Monitor Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monitor Ventures and Global Energy 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 Global Energy Metals are associated (or correlated) with Monitor Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monitor Ventures has no effect on the direction of Global Energy i.e., Global Energy and Monitor Ventures go up and down completely randomly.

Pair Corralation between Global Energy and Monitor Ventures

Assuming the 90 days horizon Global Energy Metals is expected to generate 6.58 times more return on investment than Monitor Ventures. However, Global Energy is 6.58 times more volatile than Monitor Ventures. It trades about 0.04 of its potential returns per unit of risk. Monitor Ventures is currently generating about -0.08 per unit of risk. If you would invest  1.42  in Global Energy Metals on September 12, 2024 and sell it today you would lose (0.06) from holding Global Energy Metals or give up 4.23% of portfolio value over 90 days.

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

Global Energy Metals  vs.  Monitor Ventures

Global Energy Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Energy Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Global Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Monitor Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monitor Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Global Energy and Monitor Ventures

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

The idea behind Global Energy Metals and Monitor Ventures 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.