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 Corp, 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

-0.51

Correlation Coefficient

Arrow Electronics  Monster Beverage

Excellent diversification

The 3 months correlation between Arrow and Monster is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics 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 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 Corp 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 horizon Arrow Electronics is expected to generate 1.5 times more return on investment than Monster Beverage. However, Arrow Electronics is 1.5 times more volatile than Monster Beverage Corp. It trades about 0.13 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.11 per unit of risk. If you would invest  10,700  in Arrow Electronics on September 21, 2024 and sell it today you would earn a total of  500.00  from holding Arrow Electronics or generate 4.67% return on investment over 90 days.

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

Arrow Electronics  vs.  Monster Beverage Corp

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Monster Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 4 (%) 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.

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 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.