Correlation Between Marstons PLC and Monks Investment

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

By analyzing existing cross correlation between Marstons PLC and Monks Investment Trust, you can compare the effects of market volatilities on Marstons PLC and Monks Investment 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 Marstons PLC with a short position of Monks Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marstons PLC and Monks Investment.

Diversification Opportunities for Marstons PLC and Monks Investment

-0.06

Correlation Coefficient

Marstons PLC  Monks Investment

Good diversification

The 3 months correlation between Marstons and Monks is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment Trust and Marstons PLC 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 Marstons PLC are associated (or correlated) with Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Marstons PLC i.e., Marstons PLC and Monks Investment go up and down completely randomly.

Pair Corralation between Marstons PLC and Monks Investment

Assuming the 90 days trading horizon Marstons PLC is expected to generate 3.18 times more return on investment than Monks Investment. However, Marstons PLC is 3.18 times more volatile than Monks Investment Trust. It trades about 0.07 of its potential returns per unit of risk. Monks Investment Trust is currently generating about 0.16 per unit of risk. If you would invest  4,010  in Marstons PLC on September 24, 2024 and sell it today you would earn a total of  395.00  from holding Marstons PLC or generate 9.85% return on investment over 90 days.

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

Marstons PLC  vs.  Monks Investment Trust

Marstons PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marstons PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Marstons PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Monks Investment Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Marstons PLC and Monks Investment

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

The idea behind Marstons PLC and Monks Investment Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.