Correlation Between Monde Nissin and Basic Energy

Can any of the company-specific risk be diversified away by investing in both Monde Nissin and Basic Energy 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 Monde Nissin and Basic Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Monde Nissin Corp and Basic Energy Corp, you can compare the effects of market volatilities on Monde Nissin and Basic Energy 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 Monde Nissin with a short position of Basic Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monde Nissin and Basic Energy.

Diversification Opportunities for Monde Nissin and Basic Energy

0.03

Correlation Coefficient

Monde Nissin  Basic Energy

Significant diversification

The 3 months correlation between Monde and Basic is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Monde Nissin Corp and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp and Monde Nissin 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 Monde Nissin Corp are associated (or correlated) with Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of Monde Nissin i.e., Monde Nissin and Basic Energy go up and down completely randomly.

Pair Corralation between Monde Nissin and Basic Energy

Assuming the 90 days trading horizon Monde Nissin Corp is expected to under-perform the Basic Energy. But the stock apears to be less risky and, when comparing its historical volatility, Monde Nissin Corp is 1.18 times less risky than Basic Energy. The stock trades about -0.24 of its potential returns per unit of risk. The Basic Energy Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Basic Energy Corp on October 24, 2024 and sell it today you would lose (1.00) from holding Basic Energy Corp or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Monde Nissin Corp  vs.  Basic Energy Corp

Monde Nissin Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monde Nissin Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Basic Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Basic Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Monde Nissin and Basic Energy

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

The idea behind Monde Nissin Corp and Basic Energy Corp 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 Stocks Directory module to find actively traded stocks across global markets.