Correlation Between Monks Investment and Sage Group

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

Diversification Opportunities for Monks Investment and Sage Group

0.88

Correlation Coefficient

Monks Investment  Sage Group

Very poor diversification

The 3 months correlation between Monks and Sage is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC 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 Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Monks Investment i.e., Monks Investment and Sage Group go up and down completely randomly.

Pair Corralation between Monks Investment and Sage Group

Assuming the 90 days trading horizon Monks Investment Trust is expected to under-perform the Sage Group. In addition to that, Monks Investment is 1.07 times more volatile than Sage Group PLC. It trades about -0.05 of its total potential returns per unit of risk. Sage Group PLC is currently generating about 0.02 per unit of volatility. If you would invest  128,600  in Sage Group PLC on September 23, 2024 and sell it today you would earn a total of  400.00  from holding Sage Group PLC or generate 0.31% return on investment over 90 days.

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

Monks Investment Trust  vs.  Sage Group PLC

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.

Sage Group PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Group PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Sage Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monks Investment and Sage Group

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

The idea behind Monks Investment Trust and Sage Group PLC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.