Correlation Between Phonex and Monotaro

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

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

Diversification Opportunities for Phonex and Monotaro

0.32

Correlation Coefficient

Phonex  Monotaro

Weak diversification

The 3 months correlation between Phonex and Monotaro is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Phonex Inc and Monotaro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monotaro and Phonex 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 Phonex Inc are associated (or correlated) with Monotaro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monotaro has no effect on the direction of Phonex i.e., Phonex and Monotaro go up and down completely randomly.

Pair Corralation between Phonex and Monotaro

Given the investment horizon of 90 days Phonex Inc is expected to generate 3.28 times more return on investment than Monotaro. However, Phonex is 3.28 times more volatile than Monotaro Co. It trades about 0.08 of its potential returns per unit of risk. Monotaro Co is currently generating about 0.09 per unit of risk. If you would invest  109.00  in Phonex Inc on December 29, 2024 and sell it today you would earn a total of  27.00  from holding Phonex Inc or generate 24.77% return on investment over 90 days.

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

Phonex Inc  vs.  Monotaro Co

Phonex Inc

Risk-Adjusted Performance

Modest

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

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.

Pair Trading with Phonex and Monotaro

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

The idea behind Phonex Inc and Monotaro Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.