Correlation Between MONA and EOS
Can any of the company-specific risk be diversified away by investing in both MONA and EOS 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 MONA and EOS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MONA and EOS, you can compare the effects of market volatilities on MONA and EOS 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 MONA with a short position of EOS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MONA and EOS.
Diversification Opportunities for MONA and EOS
Almost no diversification
The 3 months correlation between MONA and EOS is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding MONA and EOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOS and MONA 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 MONA are associated (or correlated) with EOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOS has no effect on the direction of MONA i.e., MONA and EOS go up and down completely randomly.
Pair Corralation between MONA and EOS
Assuming the 90 days trading horizon MONA is expected to generate 0.56 times more return on investment than EOS. However, MONA is 1.79 times less risky than EOS. It trades about -0.16 of its potential returns per unit of risk. EOS is currently generating about -0.13 per unit of risk. If you would invest 40.00 in MONA on January 25, 2024 and sell it today you would lose (6.00) from holding MONA or give up 15.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
MONA vs. EOS
Performance |
| Timeline |
| MONA |
| EOS |
MONA and EOS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MONA and EOS
The main advantage of trading using opposite MONA and EOS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MONA position performs unexpectedly, EOS 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 EOS will offset losses from the drop in EOS's long position.The idea behind MONA and EOS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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