Correlation Between Monks Investment and FC Investment

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

Diversification Opportunities for Monks Investment and FC Investment

0.97

Correlation Coefficient

Monks Investment  FC Investment

Almost no diversification

The 3 months correlation between Monks and FCIT is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and FC Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FC Investment Trust 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 FC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FC Investment Trust has no effect on the direction of Monks Investment i.e., Monks Investment and FC Investment go up and down completely randomly.

Pair Corralation between Monks Investment and FC Investment

Assuming the 90 days trading horizon Monks Investment Trust is expected to under-perform the FC Investment. In addition to that, Monks Investment is 1.29 times more volatile than FC Investment Trust. It trades about -0.07 of its total potential returns per unit of risk. FC Investment Trust is currently generating about -0.05 per unit of volatility. If you would invest  112,000  in FC Investment Trust on September 25, 2024 and sell it today you would lose (800.00) from holding FC Investment Trust or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Monks Investment Trust  vs.  FC Investment Trust

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.

FC Investment Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monks Investment and FC Investment

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

The idea behind Monks Investment Trust and FC Investment Trust 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.