Correlation Between MONA and TOPC

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

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

Diversification Opportunities for MONA and TOPC

0.0

Correlation Coefficient

MONA  TOPC

Pay attention - limited upside

The 3 months correlation between MONA and TOPC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MONA and TOPC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOPC 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 TOPC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOPC has no effect on the direction of MONA i.e., MONA and TOPC go up and down completely randomly.

Pair Corralation between MONA and TOPC

Assuming the 90 days trading horizon MONA is expected to generate 73.12 times less return on investment than TOPC. But when comparing it to its historical volatility, MONA is 10.06 times less risky than TOPC. It trades about 0.01 of its potential returns per unit of risk. TOPC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.04  in TOPC on January 25, 2024 and sell it today you would lose (0.04) from holding TOPC or give up 95.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MONA  vs.  TOPC

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.

TOPC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TOPC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MONA and TOPC

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

The idea behind MONA and TOPC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.