Correlation Between Monotaro and Boston Omaha

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

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

Diversification Opportunities for Monotaro and Boston Omaha

0.24

Correlation Coefficient

Monotaro  Boston Omaha

Modest diversification

The 3 months correlation between Monotaro and Boston is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Monotaro Co and Boston Omaha Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Omaha Corp and Monotaro 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 Monotaro Co are associated (or correlated) with Boston Omaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Omaha Corp has no effect on the direction of Monotaro i.e., Monotaro and Boston Omaha go up and down completely randomly.

Pair Corralation between Monotaro and Boston Omaha

Assuming the 90 days horizon Monotaro Co is expected to under-perform the Boston Omaha. In addition to that, Monotaro is 1.06 times more volatile than Boston Omaha Corp. It trades about -0.08 of its total potential returns per unit of risk. Boston Omaha Corp is currently generating about -0.03 per unit of volatility. If you would invest  1,506  in Boston Omaha Corp on October 26, 2024 and sell it today you would lose (36.00) from holding Boston Omaha Corp or give up 2.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Monotaro Co  vs.  Boston Omaha Corp

Monotaro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monotaro Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Monotaro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Boston Omaha Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Monotaro and Boston Omaha

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

The idea behind Monotaro Co and Boston Omaha 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..