Correlation Between MONA and Tezos

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

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

Diversification Opportunities for MONA and Tezos

0.91

Correlation Coefficient

MONA  Tezos

Almost no diversification

The 3 months correlation between MONA and Tezos is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding MONA and Tezos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tezos 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 Tezos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tezos has no effect on the direction of MONA i.e., MONA and Tezos go up and down completely randomly.

Pair Corralation between MONA and Tezos

Assuming the 90 days trading horizon MONA is expected to generate 0.68 times more return on investment than Tezos. However, MONA is 1.47 times less risky than Tezos. It trades about -0.13 of its potential returns per unit of risk. Tezos is currently generating about -0.19 per unit of risk. If you would invest  38.00  in MONA on February 4, 2024 and sell it today you would lose (4.00) from holding MONA or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

MONA  vs.  Tezos

MONA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MONA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Tezos

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tezos are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tezos may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with MONA and Tezos

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

The idea behind MONA and Tezos 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.