Correlation Between Liquidity Services and Monotaro

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

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

Diversification Opportunities for Liquidity Services and Monotaro

-0.41

Correlation Coefficient

Liquidity Services  Monotaro

Very good diversification

The 3 months correlation between Liquidity and Monotaro is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Liquidity Services and Monotaro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monotaro and Liquidity Services 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 Liquidity Services 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 Liquidity Services i.e., Liquidity Services and Monotaro go up and down completely randomly.

Pair Corralation between Liquidity Services and Monotaro

Given the investment horizon of 90 days Liquidity Services is expected to under-perform the Monotaro. In addition to that, Liquidity Services is 1.0 times more volatile than Monotaro Co. It trades about -0.01 of its total potential returns per unit of risk. Monotaro Co is currently generating about 0.09 per unit of volatility. If you would invest  1,700  in Monotaro Co on December 30, 2024 and sell it today you would earn a total of  214.00  from holding Monotaro Co or generate 12.59% return on investment over 90 days.

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

Liquidity Services  vs.  Monotaro Co

Liquidity Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liquidity Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Liquidity Services is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Monotaro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monotaro Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Monotaro showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liquidity Services and Monotaro

The main advantage of trading using opposite Liquidity Services and Monotaro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liquidity Services 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 Liquidity Services 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.