Correlation Between Monotaro and Hour Loop

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

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

Diversification Opportunities for Monotaro and Hour Loop

-0.18

Correlation Coefficient

Monotaro  Hour Loop

Good diversification

The 3 months correlation between Monotaro and Hour is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Monotaro Co and Hour Loop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hour Loop 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 Hour Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hour Loop has no effect on the direction of Monotaro i.e., Monotaro and Hour Loop go up and down completely randomly.

Pair Corralation between Monotaro and Hour Loop

Assuming the 90 days horizon Monotaro Co is expected to generate 0.38 times more return on investment than Hour Loop. However, Monotaro Co is 2.6 times less risky than Hour Loop. It trades about 0.09 of its potential returns per unit of risk. Hour Loop is currently generating about -0.1 per unit of risk. If you would invest  1,700  in Monotaro Co on December 28, 2024 and sell it today you would earn a total of  214.00  from holding Monotaro Co or generate 12.59% 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.  Hour Loop

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 inconsistent basic indicators, Monotaro showed solid returns over the last few months and may actually be approaching a breakup point.

Hour Loop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hour Loop 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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Monotaro and Hour Loop

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

The idea behind Monotaro Co and Hour Loop 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.