Correlation Between LRN and MONA

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

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

Diversification Opportunities for LRN and MONA

0.67

Correlation Coefficient

LRN  MONA

Poor diversification

The 3 months correlation between LRN and MONA is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding LRN and MONA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MONA and LRN 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 LRN are associated (or correlated) with MONA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MONA has no effect on the direction of LRN i.e., LRN and MONA go up and down completely randomly.

Pair Corralation between LRN and MONA

Assuming the 90 days trading horizon LRN is expected to generate 9.46 times more return on investment than MONA. However, LRN is 9.46 times more volatile than MONA. It trades about 0.04 of its potential returns per unit of risk. MONA is currently generating about 0.0 per unit of risk. If you would invest  0.00  in LRN on February 7, 2024 and sell it today you would earn a total of  0.48  from holding LRN or generate 9.223372036854776E16% return on investment over 90 days.

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

LRN  vs.  MONA

LRN

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days LRN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LRN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with LRN and MONA

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

The idea behind LRN and MONA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.