Correlation Between Monument Mining and Nutrien

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

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

Diversification Opportunities for Monument Mining and Nutrien

0.68

Correlation Coefficient

Monument Mining  Nutrien

Poor diversification

The 3 months correlation between Monument and Nutrien is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Monument Mining Limited and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and Monument Mining 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 Monument Mining Limited are associated (or correlated) with Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Monument Mining i.e., Monument Mining and Nutrien go up and down completely randomly.

Pair Corralation between Monument Mining and Nutrien

Assuming the 90 days horizon Monument Mining Limited is expected to generate 3.5 times more return on investment than Nutrien. However, Monument Mining is 3.5 times more volatile than Nutrien. It trades about 0.19 of its potential returns per unit of risk. Nutrien is currently generating about 0.09 per unit of risk. If you would invest  17.00  in Monument Mining Limited on September 13, 2024 and sell it today you would earn a total of  11.00  from holding Monument Mining Limited or generate 64.71% return on investment over 90 days.

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

Monument Mining Limited  vs.  Nutrien

Monument Mining

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monument Mining Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Monument Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Nutrien

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Nutrien may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monument Mining and Nutrien

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

The idea behind Monument Mining Limited and Nutrien 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.