Correlation Between Monks Investment and Associated British

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

Diversification Opportunities for Monks Investment and Associated British

-0.64

Correlation Coefficient

Monks Investment  Associated British

Excellent diversification

The 3 months correlation between Monks and Associated is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Monks Investment i.e., Monks Investment and Associated British go up and down completely randomly.

Pair Corralation between Monks Investment and Associated British

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.71 times more return on investment than Associated British. However, Monks Investment Trust is 1.41 times less risky than Associated British. It trades about 0.2 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.19 per unit of risk. If you would invest  118,200  in Monks Investment Trust on October 24, 2024 and sell it today you would earn a total of  13,800  from holding Monks Investment Trust or generate 11.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Monks Investment Trust  vs.  Associated British Foods

Monks Investment Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 15 (%) 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.

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Monks Investment and Associated British

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

The idea behind Monks Investment Trust and Associated British Foods 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .