Correlation Between Monster Beverage and Unity Software

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

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

Diversification Opportunities for Monster Beverage and Unity Software

0.72

Correlation Coefficient

Monster Beverage  Unity Software

Poor diversification

The 3 months correlation between Monster and Unity is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software 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 Unity Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Software has no effect on the direction of Monster Beverage i.e., Monster Beverage and Unity Software go up and down completely randomly.

Pair Corralation between Monster Beverage and Unity Software

Assuming the 90 days trading horizon Monster Beverage is expected to under-perform the Unity Software. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage is 2.57 times less risky than Unity Software. The stock trades about -0.03 of its potential returns per unit of risk. The Unity Software is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  731.00  in Unity Software on December 2, 2024 and sell it today you would earn a total of  7.00  from holding Unity Software or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Monster Beverage  vs.  Unity Software

Monster Beverage

Risk-Adjusted Performance

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.

Unity Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Unity Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Monster Beverage and Unity Software

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

The idea behind Monster Beverage and Unity Software 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.