Correlation Between Monster Beverage and Universal Health

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

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

Diversification Opportunities for Monster Beverage and Universal Health

-0.26

Correlation Coefficient

Monster Beverage  Universal Health

Very good diversification

The 3 months correlation between Monster and Universal is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Universal Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Ser 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Ser has no effect on the direction of Monster Beverage i.e., Monster Beverage and Universal Health go up and down completely randomly.

Pair Corralation between Monster Beverage and Universal Health

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.8 times more return on investment than Universal Health. However, Monster Beverage is 1.8 times more volatile than Universal Health Services,. It trades about 0.03 of its potential returns per unit of risk. Universal Health Services, is currently generating about 0.04 per unit of risk. If you would invest  3,326  in Monster Beverage on October 27, 2024 and sell it today you would earn a total of  390.00  from holding Monster Beverage or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Monster Beverage  vs.  Universal Health Services,

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.

Universal Health Ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Health Services, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Monster Beverage and Universal Health

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

The idea behind Monster Beverage and Universal Health Services, 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 Anywhere module to track or share privately all of your investments from the convenience of any device.