Correlation Between MONA and UGAS

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

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

Diversification Opportunities for MONA and UGAS

-0.01

Correlation Coefficient

MONA  UGAS

Good diversification

The 3 months correlation between MONA and UGAS is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MONA and UGAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UGAS 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 UGAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UGAS has no effect on the direction of MONA i.e., MONA and UGAS go up and down completely randomly.

Pair Corralation between MONA and UGAS

Assuming the 90 days trading horizon MONA is expected to generate 0.51 times more return on investment than UGAS. However, MONA is 1.95 times less risky than UGAS. It trades about -0.16 of its potential returns per unit of risk. UGAS is currently generating about -0.12 per unit of risk. If you would invest  40.00  in MONA on January 29, 2024 and sell it today you would lose (6.00) from holding MONA or give up 15.0% of portfolio value over 90 days.

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

MONA  vs.  UGAS

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.

UGAS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UGAS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, UGAS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MONA and UGAS

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

The idea behind MONA and UGAS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.