Correlation Between Monks Investment and Metro Bank
Can any of the company-specific risk be diversified away by investing in both Monks Investment and Metro Bank 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 Metro Bank 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 Metro Bank PLC, you can compare the effects of market volatilities on Monks Investment and Metro Bank 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 Metro Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monks Investment and Metro Bank.
Diversification Opportunities for Monks Investment and Metro Bank
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monks and Metro is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Metro Bank PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Bank 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 Metro Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Bank PLC has no effect on the direction of Monks Investment i.e., Monks Investment and Metro Bank go up and down completely randomly.
Pair Corralation between Monks Investment and Metro Bank
Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.36 times more return on investment than Metro Bank. However, Monks Investment Trust is 2.79 times less risky than Metro Bank. It trades about 0.37 of its potential returns per unit of risk. Metro Bank PLC is currently generating about 0.03 per unit of risk. If you would invest 125,400 in Monks Investment Trust on October 28, 2024 and sell it today you would earn a total of 8,400 from holding Monks Investment Trust or generate 6.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monks Investment Trust vs. Metro Bank PLC
Performance |
| Timeline |
| Monks Investment Trust |
| Metro Bank PLC |
Monks Investment and Metro Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monks Investment and Metro Bank
The main advantage of trading using opposite Monks Investment and Metro Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment position performs unexpectedly, Metro Bank 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 Metro Bank will offset losses from the drop in Metro Bank's long position.| Monks Investment vs. Metals Exploration Plc | Monks Investment vs. Electronic Arts | Monks Investment vs. Compal Electronics GDR | Monks Investment vs. Thor Mining PLC |
| Metro Bank vs. HCA Healthcare | Metro Bank vs. Flow Traders NV | Metro Bank vs. Associated British Foods | Metro Bank vs. National Beverage Corp |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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