Correlation Between SC and MONA

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

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

Diversification Opportunities for SC and MONA

0.84

Correlation Coefficient

SC  MONA

Very poor diversification

The 3 months correlation between SC and MONA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SC and MONA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MONA and SC 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 SC 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 SC i.e., SC and MONA go up and down completely randomly.

Pair Corralation between SC and MONA

Assuming the 90 days horizon SC is expected to generate 0.73 times more return on investment than MONA. However, SC is 1.37 times less risky than MONA. It trades about -0.03 of its potential returns per unit of risk. MONA is currently generating about -0.04 per unit of risk. If you would invest  0.35  in SC on April 20, 2025 and sell it today you would lose (0.04) from holding SC or give up 11.24% of portfolio value over 90 days.

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

SC  vs.  MONA

SC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for SC shareholders.

MONA

Risk-Adjusted Performance

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 latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for MONA shareholders.

Pair Trading with SC and MONA

The main advantage of trading using opposite SC and MONA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SC 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 SC 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.