Correlation Between Digital Realty and Monster Beverage

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

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

Diversification Opportunities for Digital Realty and Monster Beverage

0.54

Correlation Coefficient

Digital Realty  Monster Beverage

Very weak diversification

The 3 months correlation between Digital and Monster is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Digital Realty 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 Digital Realty Trust are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Digital Realty i.e., Digital Realty and Monster Beverage go up and down completely randomly.

Pair Corralation between Digital Realty and Monster Beverage

Assuming the 90 days trading horizon Digital Realty Trust is expected to under-perform the Monster Beverage. In addition to that, Digital Realty is 1.51 times more volatile than Monster Beverage Corp. It trades about -0.1 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.09 per unit of volatility. If you would invest  5,348  in Monster Beverage Corp on November 20, 2024 and sell it today you would lose (391.00) from holding Monster Beverage Corp or give up 7.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Digital Realty Trust  vs.  Monster Beverage Corp

Digital Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Monster Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Digital Realty and Monster Beverage

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

The idea behind Digital Realty Trust and Monster Beverage Corp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.