Correlation Between MONA and BCN

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

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

Diversification Opportunities for MONA and BCN

0.38

Correlation Coefficient

MONA  BCN

Weak diversification

The 3 months correlation between MONA and BCN is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MONA and BCN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCN 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 BCN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCN has no effect on the direction of MONA i.e., MONA and BCN go up and down completely randomly.

Pair Corralation between MONA and BCN

Assuming the 90 days trading horizon MONA is expected to under-perform the BCN. But the crypto coin apears to be less risky and, when comparing its historical volatility, MONA is 84.58 times less risky than BCN. The crypto coin trades about -0.16 of its potential returns per unit of risk. The BCN is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  0.03  in BCN on January 28, 2024 and sell it today you would lose  0.00  from holding BCN or give up 8.57% of portfolio value over 90 days.

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

MONA  vs.  BCN

MONA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MONA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, MONA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BCN

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BCN are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BCN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MONA and BCN

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

The idea behind MONA and BCN 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..