Correlation Between Monster Beverage and Seiko Epson

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

Diversification Opportunities for Monster Beverage and Seiko Epson

-0.6

Correlation Coefficient

Monster Beverage  Seiko Epson

Excellent diversification

The 3 months correlation between Monster and Seiko is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Seiko Epson Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson Corp has no effect on the direction of Monster Beverage i.e., Monster Beverage and Seiko Epson go up and down completely randomly.

Pair Corralation between Monster Beverage and Seiko Epson

Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the Seiko Epson. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.11 times less risky than Seiko Epson. The stock trades about -0.11 of its potential returns per unit of risk. The Seiko Epson Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  875.00  in Seiko Epson Corp on September 18, 2024 and sell it today you would earn a total of  50.00  from holding Seiko Epson Corp or generate 5.71% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Seiko Epson Corp

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Seiko Epson Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seiko Epson Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Seiko Epson is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and Seiko Epson

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

The idea behind Monster Beverage Corp and Seiko Epson 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.