Correlation Between Invitation Homes and Monster Beverage

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

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

Diversification Opportunities for Invitation Homes and Monster Beverage

0.42

Correlation Coefficient

Invitation Homes  Monster Beverage

Very weak diversification

The 3 months correlation between Invitation and Monster is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Invitation Homes and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and Invitation Homes 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 Invitation Homes 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 Invitation Homes i.e., Invitation Homes and Monster Beverage go up and down completely randomly.

Pair Corralation between Invitation Homes and Monster Beverage

Assuming the 90 days trading horizon Invitation Homes is expected to generate 0.38 times more return on investment than Monster Beverage. However, Invitation Homes is 2.61 times less risky than Monster Beverage. It trades about -0.41 of its potential returns per unit of risk. Monster Beverage is currently generating about -0.34 per unit of risk. If you would invest  3,932  in Invitation Homes on October 22, 2024 and sell it today you would lose (43.00) from holding Invitation Homes or give up 1.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.29%
Values	Daily Returns

Invitation Homes  vs.  Monster Beverage

Invitation Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invitation Homes 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

0 of 100

Very Weak

Over the last 90 days Monster Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invitation Homes and Monster Beverage

The main advantage of trading using opposite Invitation Homes and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invitation Homes 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 Invitation Homes 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.