Correlation Between Monotaro and Magnite

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

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

Diversification Opportunities for Monotaro and Magnite

0.68

Correlation Coefficient

Monotaro  Magnite

Poor diversification

The 3 months correlation between Monotaro and Magnite is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Monotaro Co and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite 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 Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of Monotaro i.e., Monotaro and Magnite go up and down completely randomly.

Pair Corralation between Monotaro and Magnite

Assuming the 90 days horizon Monotaro Co is expected to under-perform the Magnite. But the pink sheet apears to be less risky and, when comparing its historical volatility, Monotaro Co is 1.22 times less risky than Magnite. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Magnite is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,224  in Magnite on October 11, 2024 and sell it today you would earn a total of  422.00  from holding Magnite or generate 34.48% return on investment over 90 days.

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

Monotaro Co  vs.  Magnite

Monotaro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monotaro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Monotaro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Magnite

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monotaro and Magnite

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

The idea behind Monotaro Co and Magnite 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.