Correlation Between Monster Beverage and UnitedHealth Group

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

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

Diversification Opportunities for Monster Beverage and UnitedHealth Group

0.55

Correlation Coefficient

Monster Beverage  UnitedHealth Group

Very weak diversification

The 3 months correlation between Monster and UnitedHealth is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group 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 Corp are associated (or correlated) with UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Monster Beverage i.e., Monster Beverage and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Monster Beverage and UnitedHealth Group

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.4 times more return on investment than UnitedHealth Group. However, Monster Beverage Corp is 2.51 times less risky than UnitedHealth Group. It trades about -0.34 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about -0.31 per unit of risk. If you would invest  110,865  in Monster Beverage Corp on September 24, 2024 and sell it today you would lose (8,265) from holding Monster Beverage Corp or give up 7.46% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  UnitedHealth Group Incorporate

Monster Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Monster Beverage and UnitedHealth Group

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

The idea behind Monster Beverage Corp and UnitedHealth Group Incorporated 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.