Correlation Between MONA and Gnosis
Can any of the company-specific risk be diversified away by investing in both MONA and Gnosis 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 Gnosis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MONA and Gnosis, you can compare the effects of market volatilities on MONA and Gnosis 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 Gnosis. Check out your portfolio center. Please also check ongoing floating volatility patterns of MONA and Gnosis.
Diversification Opportunities for MONA and Gnosis
Very poor diversification
The 3 months correlation between MONA and Gnosis is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MONA and Gnosis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnosis 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 Gnosis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnosis has no effect on the direction of MONA i.e., MONA and Gnosis go up and down completely randomly.
Pair Corralation between MONA and Gnosis
Assuming the 90 days trading horizon MONA is expected to generate 43.07 times less return on investment than Gnosis. In addition to that, MONA is 1.13 times more volatile than Gnosis. It trades about 0.0 of its total potential returns per unit of risk. Gnosis is currently generating about 0.13 per unit of volatility. If you would invest 10,764 in Gnosis on January 20, 2024 and sell it today you would earn a total of 23,374 from holding Gnosis or generate 217.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MONA vs. Gnosis
Performance |
| Timeline |
| MONA |
| Gnosis |
MONA and Gnosis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MONA and Gnosis
The main advantage of trading using opposite MONA and Gnosis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MONA position performs unexpectedly, Gnosis 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 Gnosis will offset losses from the drop in Gnosis' long position.The idea behind MONA and Gnosis 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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