Correlation Between Monks Investment and Alphabet

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

Diversification Opportunities for Monks Investment and Alphabet

0.62

Correlation Coefficient

Monks Investment  Alphabet

Poor diversification

The 3 months correlation between Monks and Alphabet is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Monks Investment i.e., Monks Investment and Alphabet go up and down completely randomly.

Pair Corralation between Monks Investment and Alphabet

Assuming the 90 days trading horizon Monks Investment is expected to generate 1.83 times less return on investment than Alphabet. But when comparing it to its historical volatility, Monks Investment Trust is 1.92 times less risky than Alphabet. It trades about 0.06 of its potential returns per unit of risk. Alphabet Class A is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16,670  in Alphabet Class A on September 24, 2024 and sell it today you would earn a total of  2,410  from holding Alphabet Class A or generate 14.46% return on investment over 90 days.

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

Monks Investment Trust  vs.  Alphabet Class A

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.

Alphabet Class A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alphabet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monks Investment and Alphabet

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

The idea behind Monks Investment Trust and Alphabet Class A 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.