Correlation Between MONA and ULT

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

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

Diversification Opportunities for MONA and ULT

-0.52

Correlation Coefficient

MONA  ULT

Excellent diversification

The 3 months correlation between MONA and ULT is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding MONA and ULT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULT 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 ULT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULT has no effect on the direction of MONA i.e., MONA and ULT go up and down completely randomly.

Pair Corralation between MONA and ULT

If you would invest  0.45  in ULT on January 20, 2024 and sell it today you would earn a total of  0.00  from holding ULT or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

MONA  vs.  ULT

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.

ULT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ULT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ULT 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 ULT

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

The idea behind MONA and ULT 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.