Correlation Between Monks Investment and Dotdigital Group

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Can any of the company-specific risk be diversified away by investing in both Monks Investment and Dotdigital Group 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 Monks Investment and Dotdigital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monks Investment Trust and Dotdigital Group Plc, you can compare the effects of market volatilities on Monks Investment and Dotdigital Group 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 Monks Investment with a short position of Dotdigital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monks Investment and Dotdigital Group.

Diversification Opportunities for Monks Investment and Dotdigital Group

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Monks and Dotdigital is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Dotdigital Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dotdigital Group Plc and Monks Investment 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 Monks Investment Trust are associated (or correlated) with Dotdigital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dotdigital Group Plc has no effect on the direction of Monks Investment i.e., Monks Investment and Dotdigital Group go up and down completely randomly.

Pair Corralation between Monks Investment and Dotdigital Group

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.34 times more return on investment than Dotdigital Group. However, Monks Investment Trust is 2.95 times less risky than Dotdigital Group. It trades about 0.04 of its potential returns per unit of risk. Dotdigital Group Plc is currently generating about -0.12 per unit of risk. If you would invest  127,400  in Monks Investment Trust on September 15, 2024 and sell it today you would earn a total of  800.00  from holding Monks Investment Trust or generate 0.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Monks Investment Trust  vs.  Dotdigital Group Plc

 Performance 
       Timeline  
Monks Investment Trust 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Dotdigital Group Plc 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Dotdigital Group Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dotdigital Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Monks Investment and Dotdigital Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Monks Investment and Dotdigital Group

The main advantage of trading using opposite Monks Investment and Dotdigital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment position performs unexpectedly, Dotdigital Group 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 Dotdigital Group will offset losses from the drop in Dotdigital Group's long position.
The idea behind Monks Investment Trust and Dotdigital Group Plc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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