Correlation Between Universal Insurance and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Universal Insurance 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 Universal Insurance and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Insurance Holdings and Monster Beverage Corp, you can compare the effects of market volatilities on Universal Insurance 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 Universal Insurance with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Monster Beverage.
Diversification Opportunities for Universal Insurance and Monster Beverage
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Monster is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings 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 Universal Insurance 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 Universal Insurance Holdings 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 Universal Insurance i.e., Universal Insurance and Monster Beverage go up and down completely randomly.
Pair Corralation between Universal Insurance and Monster Beverage
Assuming the 90 days horizon Universal Insurance is expected to generate 1.51 times less return on investment than Monster Beverage. In addition to that, Universal Insurance is 1.83 times more volatile than Monster Beverage Corp. It trades about 0.02 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.07 per unit of volatility. If you would invest 4,667 in Monster Beverage Corp on September 25, 2024 and sell it today you would earn a total of 289.00 from holding Monster Beverage Corp or generate 6.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Universal Insurance Holdings vs. Monster Beverage Corp
Performance |
Timeline |
Universal Insurance |
Monster Beverage Corp |
Universal Insurance and Monster Beverage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Universal Insurance and Monster Beverage
The main advantage of trading using opposite Universal Insurance and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance 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.Universal Insurance vs. The Progressive | Universal Insurance vs. The Allstate | Universal Insurance vs. PICC Property and | Universal Insurance vs. Cincinnati Financial |
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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 the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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