Correlation Between Montea Comm and Warehouses

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

By analyzing existing cross correlation between Montea Comm VA and Warehouses De Pauw, you can compare the effects of market volatilities on Montea Comm and Warehouses 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 Montea Comm with a short position of Warehouses. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montea Comm and Warehouses.

Diversification Opportunities for Montea Comm and Warehouses

0.97

Correlation Coefficient

Montea Comm  Warehouses

Almost no diversification

The 3 months correlation between Montea and Warehouses is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Montea Comm VA and Warehouses De Pauw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouses De Pauw and Montea Comm 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 Montea Comm VA are associated (or correlated) with Warehouses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouses De Pauw has no effect on the direction of Montea Comm i.e., Montea Comm and Warehouses go up and down completely randomly.

Pair Corralation between Montea Comm and Warehouses

Assuming the 90 days horizon Montea Comm VA is expected to generate 0.73 times more return on investment than Warehouses. However, Montea Comm VA is 1.38 times less risky than Warehouses. It trades about -0.27 of its potential returns per unit of risk. Warehouses De Pauw is currently generating about -0.31 per unit of risk. If you would invest  6,560  in Montea Comm VA on September 26, 2024 and sell it today you would lose (350.00) from holding Montea Comm VA or give up 5.34% of portfolio value over 90 days.

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

Montea Comm VA  vs.  Warehouses De Pauw

Montea Comm VA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montea Comm VA 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Warehouses De Pauw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Warehouses De Pauw 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 technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Montea Comm and Warehouses

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

The idea behind Montea Comm VA and Warehouses De Pauw 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.