Correlation Between Leading Edge and Monitor Ventures

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

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

Diversification Opportunities for Leading Edge and Monitor Ventures

-0.48

Correlation Coefficient

Leading Edge  Monitor Ventures

Very good diversification

The 3 months correlation between Leading and Monitor is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Monitor Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monitor Ventures and Leading Edge 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 Leading Edge Materials 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 Leading Edge i.e., Leading Edge and Monitor Ventures go up and down completely randomly.

Pair Corralation between Leading Edge and Monitor Ventures

Assuming the 90 days horizon Leading Edge Materials is expected to generate 7.19 times more return on investment than Monitor Ventures. However, Leading Edge is 7.19 times more volatile than Monitor Ventures. It trades about 0.14 of its potential returns per unit of risk. Monitor Ventures is currently generating about -0.16 per unit of risk. If you would invest  6.30  in Leading Edge Materials on December 27, 2024 and sell it today you would earn a total of  5.70  from holding Leading Edge Materials or generate 90.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Leading Edge Materials  vs.  Monitor Ventures

Leading Edge Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leading Edge Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Leading Edge reported solid returns over the last few months and may actually be approaching a breakup point.

Monitor Ventures

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monitor Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Leading Edge and Monitor Ventures

The main advantage of trading using opposite Leading Edge and Monitor Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge 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 Leading Edge Materials 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.