Correlation Between Monster Beverage and UTStarcom Holdings

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and UTStarcom Holdings 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 UTStarcom Holdings 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 UTStarcom Holdings Corp, you can compare the effects of market volatilities on Monster Beverage and UTStarcom Holdings 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 UTStarcom Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and UTStarcom Holdings.

Diversification Opportunities for Monster Beverage and UTStarcom Holdings

-0.22

Correlation Coefficient

Monster Beverage  UTStarcom Holdings

Very good diversification

The 3 months correlation between Monster and UTStarcom is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and UTStarcom Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTStarcom Holdings Corp 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 UTStarcom Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTStarcom Holdings Corp has no effect on the direction of Monster Beverage i.e., Monster Beverage and UTStarcom Holdings go up and down completely randomly.

Pair Corralation between Monster Beverage and UTStarcom Holdings

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.67 times more return on investment than UTStarcom Holdings. However, Monster Beverage Corp is 1.49 times less risky than UTStarcom Holdings. It trades about 0.02 of its potential returns per unit of risk. UTStarcom Holdings Corp is currently generating about -0.03 per unit of risk. If you would invest  94,412  in Monster Beverage Corp on October 12, 2024 and sell it today you would earn a total of  11,798  from holding Monster Beverage Corp or generate 12.5% return on investment over 90 days.

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

Monster Beverage Corp  vs.  UTStarcom Holdings Corp

Monster Beverage Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

UTStarcom Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Monster Beverage and UTStarcom Holdings

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

The idea behind Monster Beverage Corp and UTStarcom Holdings Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.