Correlation Between Monotaro and Solo Brands

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

By analyzing existing cross correlation between Monotaro Co and Solo Brands, you can compare the effects of market volatilities on Monotaro and Solo Brands 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 Solo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monotaro and Solo Brands.

Diversification Opportunities for Monotaro and Solo Brands

-0.34

Correlation Coefficient

Monotaro  Solo Brands

Very good diversification

The 3 months correlation between Monotaro and Solo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Monotaro Co and Solo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solo Brands 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 Solo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solo Brands has no effect on the direction of Monotaro i.e., Monotaro and Solo Brands go up and down completely randomly.

Pair Corralation between Monotaro and Solo Brands

Assuming the 90 days horizon Monotaro Co is expected to generate 0.28 times more return on investment than Solo Brands. However, Monotaro Co is 3.55 times less risky than Solo Brands. It trades about 0.08 of its potential returns per unit of risk. Solo Brands is currently generating about -0.26 per unit of risk. If you would invest  1,728  in Monotaro Co on December 25, 2024 and sell it today you would earn a total of  201.00  from holding Monotaro Co or generate 11.63% return on investment over 90 days.

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

Monotaro Co  vs.  Solo Brands

Monotaro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monotaro Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Monotaro showed solid returns over the last few months and may actually be approaching a breakup point.

Solo Brands

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Monotaro and Solo Brands

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

The idea behind Monotaro Co and Solo Brands 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.