Correlation Between MONA and DOCK

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

By analyzing existing cross correlation between MONA and DOCK, you can compare the effects of market volatilities on MONA and DOCK 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 DOCK. Check out your portfolio center. Please also check ongoing floating volatility patterns of MONA and DOCK.

Diversification Opportunities for MONA and DOCK

0.79

Correlation Coefficient

MONA  DOCK

Poor diversification

The 3 months correlation between MONA and DOCK is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding MONA and DOCK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCK 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 DOCK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCK has no effect on the direction of MONA i.e., MONA and DOCK go up and down completely randomly.

Pair Corralation between MONA and DOCK

Assuming the 90 days trading horizon MONA is expected to generate 0.65 times more return on investment than DOCK. However, MONA is 1.53 times less risky than DOCK. It trades about -0.11 of its potential returns per unit of risk. DOCK is currently generating about -0.2 per unit of risk. If you would invest  39.00  in MONA on January 20, 2024 and sell it today you would lose (4.00) from holding MONA or give up 10.26% of portfolio value over 90 days.

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

MONA  vs.  DOCK

MONA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MONA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MONA may actually be approaching a critical reversion point that can send shares even higher in May 2024.

DOCK

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DOCK are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DOCK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MONA and DOCK

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

The idea behind MONA and DOCK 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 Stocks Directory module to find actively traded stocks across global markets.