Correlation Between Monks Investment and Fannie Mae

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

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

Diversification Opportunities for Monks Investment and Fannie Mae

0.87

Correlation Coefficient

Monks Investment  Fannie Mae

Very poor diversification

The 3 months correlation between Monks and Fannie is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Fannie Mae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fannie Mae and Monks Investment 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 Monks Investment Trust are associated (or correlated) with Fannie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fannie Mae has no effect on the direction of Monks Investment i.e., Monks Investment and Fannie Mae go up and down completely randomly.

Pair Corralation between Monks Investment and Fannie Mae

Assuming the 90 days trading horizon Monks Investment is expected to generate 10.35 times less return on investment than Fannie Mae. But when comparing it to its historical volatility, Monks Investment Trust is 11.49 times less risky than Fannie Mae. It trades about 0.25 of its potential returns per unit of risk. Fannie Mae is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  121.00  in Fannie Mae on September 14, 2024 and sell it today you would earn a total of  154.00  from holding Fannie Mae or generate 127.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	75.0%
Values	Daily Returns

Monks Investment Trust  vs.  Fannie Mae

Monks Investment Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fannie Mae

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fannie Mae are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Fannie Mae unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monks Investment and Fannie Mae

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

The idea behind Monks Investment Trust and Fannie Mae 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.