Correlation Between Noble Financials and Monnari Trade

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

By analyzing existing cross correlation between Noble Financials SA and Monnari Trade SA, you can compare the effects of market volatilities on Noble Financials and Monnari Trade 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 Noble Financials with a short position of Monnari Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Financials and Monnari Trade.

Diversification Opportunities for Noble Financials and Monnari Trade

-0.26

Correlation Coefficient

Noble Financials  Monnari Trade

Very good diversification

The 3 months correlation between Noble and Monnari is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Noble Financials SA and Monnari Trade SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monnari Trade SA and Noble Financials 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 Noble Financials SA are associated (or correlated) with Monnari Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monnari Trade SA has no effect on the direction of Noble Financials i.e., Noble Financials and Monnari Trade go up and down completely randomly.

Pair Corralation between Noble Financials and Monnari Trade

Assuming the 90 days trading horizon Noble Financials SA is expected to generate 1.7 times more return on investment than Monnari Trade. However, Noble Financials is 1.7 times more volatile than Monnari Trade SA. It trades about 0.01 of its potential returns per unit of risk. Monnari Trade SA is currently generating about -0.03 per unit of risk. If you would invest  7,580  in Noble Financials SA on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Noble Financials SA or generate 0.0% return on investment over 90 days.

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

Noble Financials SA  vs.  Monnari Trade SA

Noble Financials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Noble Financials SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Noble Financials is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Monnari Trade SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monnari Trade SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Monnari Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Noble Financials and Monnari Trade

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

The idea behind Noble Financials SA and Monnari Trade SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.