Correlation Between Monks Investment and Kinnevik Investment

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

Diversification Opportunities for Monks Investment and Kinnevik Investment

0.84

Correlation Coefficient

Monks Investment  Kinnevik Investment

Very poor diversification

The 3 months correlation between Monks and Kinnevik is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Monks Investment i.e., Monks Investment and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Monks Investment and Kinnevik Investment

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.46 times more return on investment than Kinnevik Investment. However, Monks Investment Trust is 2.16 times less risky than Kinnevik Investment. It trades about 0.07 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about -0.04 per unit of risk. If you would invest  93,328  in Monks Investment Trust on December 2, 2024 and sell it today you would earn a total of  34,472  from holding Monks Investment Trust or generate 36.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.81%
Values	Daily Returns

Monks Investment Trust  vs.  Kinnevik Investment AB

Monks Investment Trust

Risk-Adjusted Performance

Very Weak

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

Kinnevik Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kinnevik Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monks Investment and Kinnevik Investment

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

The idea behind Monks Investment Trust and Kinnevik Investment AB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.