Correlation Between Monster Beverage and Futura Medical

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

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

Diversification Opportunities for Monster Beverage and Futura Medical

0.37

Correlation Coefficient

Monster Beverage  Futura Medical

Weak diversification

The 3 months correlation between Monster and Futura is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Futura Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futura Medical and Monster Beverage 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 Monster Beverage Corp are associated (or correlated) with Futura Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futura Medical has no effect on the direction of Monster Beverage i.e., Monster Beverage and Futura Medical go up and down completely randomly.

Pair Corralation between Monster Beverage and Futura Medical

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.92 times more return on investment than Futura Medical. However, Monster Beverage Corp is 1.08 times less risky than Futura Medical. It trades about -0.19 of its potential returns per unit of risk. Futura Medical is currently generating about -0.2 per unit of risk. If you would invest  5,499  in Monster Beverage Corp on September 28, 2024 and sell it today you would lose (223.00) from holding Monster Beverage Corp or give up 4.06% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Futura Medical

Monster Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Futura Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Monster Beverage and Futura Medical

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

The idea behind Monster Beverage Corp and Futura Medical 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.