Correlation Between Arrow Electronics, and Monster Beverage

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

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

Diversification Opportunities for Arrow Electronics, and Monster Beverage

-0.62

Correlation Coefficient

Arrow Electronics,  Monster Beverage

Excellent diversification

The 3 months correlation between Arrow and Monster is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics, and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and Arrow Electronics, 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 Arrow Electronics, 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 has no effect on the direction of Arrow Electronics, i.e., Arrow Electronics, and Monster Beverage go up and down completely randomly.

Pair Corralation between Arrow Electronics, and Monster Beverage

Assuming the 90 days trading horizon Arrow Electronics, is expected to generate 3.28 times less return on investment than Monster Beverage. But when comparing it to its historical volatility, Arrow Electronics, is 1.56 times less risky than Monster Beverage. It trades about 0.05 of its potential returns per unit of risk. Monster Beverage is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,600  in Monster Beverage on September 13, 2024 and sell it today you would earn a total of  383.00  from holding Monster Beverage or generate 10.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Arrow Electronics,  vs.  Monster Beverage

Arrow Electronics,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Arrow Electronics, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Monster Beverage

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arrow Electronics, and Monster Beverage

The main advantage of trading using opposite Arrow Electronics, and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics, 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 Arrow Electronics, and Monster Beverage 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.