Correlation Between Hour Loop and Monotaro

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

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

Diversification Opportunities for Hour Loop and Monotaro

-0.08

Correlation Coefficient

Hour Loop  Monotaro

Good diversification

The 3 months correlation between Hour and Monotaro is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hour Loop and Monotaro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monotaro and Hour Loop 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 Hour Loop 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 Hour Loop i.e., Hour Loop and Monotaro go up and down completely randomly.

Pair Corralation between Hour Loop and Monotaro

Given the investment horizon of 90 days Hour Loop is expected to generate 1.6 times more return on investment than Monotaro. However, Hour Loop is 1.6 times more volatile than Monotaro Co. It trades about 0.07 of its potential returns per unit of risk. Monotaro Co is currently generating about 0.06 per unit of risk. If you would invest  125.00  in Hour Loop on September 5, 2024 and sell it today you would earn a total of  18.00  from holding Hour Loop or generate 14.4% return on investment over 90 days.

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

Hour Loop  vs.  Monotaro Co

Hour Loop

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.

Monotaro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monotaro Co are ranked lower than 4 (%) 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 January 2025.

Pair Trading with Hour Loop and Monotaro

The main advantage of trading using opposite Hour Loop and Monotaro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hour Loop 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 Hour Loop 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.