Correlation Between Monster Beverage and Roku

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

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

Diversification Opportunities for Monster Beverage and Roku

0.36

Correlation Coefficient

Monster Beverage  Roku

Weak diversification

The 3 months correlation between Monster and Roku is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc 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 are associated (or correlated) with Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Roku go up and down completely randomly.

Pair Corralation between Monster Beverage and Roku

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.29 times less return on investment than Roku. In addition to that, Monster Beverage is 1.31 times more volatile than Roku Inc. It trades about 0.03 of its total potential returns per unit of risk. Roku Inc is currently generating about 0.05 per unit of volatility. If you would invest  1,412  in Roku Inc on October 14, 2024 and sell it today you would earn a total of  1,030  from holding Roku Inc or generate 72.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Monster Beverage  vs.  Roku Inc

Monster Beverage

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 5 (%) 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 February 2025.

Roku Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Roku sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Roku

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

The idea behind Monster Beverage and Roku Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.