Correlation Between Monks Investment and Raytheon Technologies

Can any of the company-specific risk be diversified away by investing in both Monks Investment and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies Corp, you can compare the effects of market volatilities on Monks Investment and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monks Investment and Raytheon Technologies.

Diversification Opportunities for Monks Investment and Raytheon Technologies

-0.66

Correlation Coefficient

Monks Investment  Raytheon Technologies

Excellent diversification

The 3 months correlation between Monks and Raytheon is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Monks Investment i.e., Monks Investment and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Monks Investment and Raytheon Technologies

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.78 times more return on investment than Raytheon Technologies. However, Monks Investment Trust is 1.28 times less risky than Raytheon Technologies. It trades about 0.16 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about -0.04 per unit of risk. If you would invest  118,400  in Monks Investment Trust on October 22, 2024 and sell it today you would earn a total of  11,000  from holding Monks Investment Trust or generate 9.29% return on investment over 90 days.

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

Monks Investment Trust  vs.  Raytheon Technologies Corp

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 unsteady basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Monks Investment and Raytheon Technologies

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

The idea behind Monks Investment Trust and Raytheon Technologies Corp 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.