Correlation Between Monks Investment and Sage Group
Can any of the company-specific risk be diversified away by investing in both Monks Investment and Sage 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 Sage 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 Sage Group PLC, you can compare the effects of market volatilities on Monks Investment and Sage 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 Sage Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monks Investment and Sage Group.
Diversification Opportunities for Monks Investment and Sage Group
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monks and Sage is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage 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 Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Monks Investment i.e., Monks Investment and Sage Group go up and down completely randomly.
Pair Corralation between Monks Investment and Sage Group
Assuming the 90 days trading horizon Monks Investment is expected to generate 2.17 times less return on investment than Sage Group. But when comparing it to its historical volatility, Monks Investment Trust is 1.51 times less risky than Sage Group. It trades about 0.06 of its potential returns per unit of risk. Sage Group PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 71,390 in Sage Group PLC on September 23, 2024 and sell it today you would earn a total of 57,610 from holding Sage Group PLC or generate 80.7% 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. Sage Group PLC
Performance |
| Timeline |
| Monks Investment Trust |
| Sage Group PLC |
Monks Investment and Sage Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monks Investment and Sage Group
The main advantage of trading using opposite Monks Investment and Sage Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment position performs unexpectedly, Sage 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 Sage Group will offset losses from the drop in Sage Group's long position.| Monks Investment vs. Samsung Electronics Co | Monks Investment vs. Samsung Electronics Co | Monks Investment vs. Hyundai Motor | Monks Investment vs. Toyota Motor Corp |
| Sage Group vs. Samsung Electronics Co | Sage Group vs. Samsung Electronics Co | Sage Group vs. Hyundai Motor | Sage Group vs. Toyota Motor 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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