Correlation Between Montauk Renewables and COCOS BCX

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Can any of the company-specific risk be diversified away by investing in both Montauk Renewables and COCOS BCX 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 Montauk Renewables and COCOS BCX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Montauk Renewables and COCOS BCX, you can compare the effects of market volatilities on Montauk Renewables and COCOS BCX 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 Montauk Renewables with a short position of COCOS BCX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montauk Renewables and COCOS BCX.

Diversification Opportunities for Montauk Renewables and COCOS BCX

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Montauk and COCOS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and COCOS BCX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCOS BCX and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with COCOS BCX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCOS BCX has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and COCOS BCX go up and down completely randomly.

Pair Corralation between Montauk Renewables and COCOS BCX

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the COCOS BCX. But the stock apears to be less risky and, when comparing its historical volatility, Montauk Renewables is 127.69 times less risky than COCOS BCX. The stock trades about -0.29 of its potential returns per unit of risk. The COCOS BCX is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  28.00  in COCOS BCX on September 7, 2022 and sell it today you would earn a total of  23.00  from holding COCOS BCX or generate 82.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Montauk Renewables  vs.  COCOS BCX

 Performance (%) 
       Timeline  
Montauk Renewables 
Montauk Performance
0 of 100
Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2023. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Montauk Price Channel

COCOS BCX 
COCOS Performance
25 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in COCOS BCX are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COCOS BCX sustained solid returns over the last few months and may actually be approaching a breakup point.

COCOS Price Channel

Montauk Renewables and COCOS BCX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Montauk Renewables and COCOS BCX

The main advantage of trading using opposite Montauk Renewables and COCOS BCX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables position performs unexpectedly, COCOS BCX 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 COCOS BCX will offset losses from the drop in COCOS BCX's long position.
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The idea behind Montauk Renewables and COCOS BCX 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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