Correlation Between Monster Beverage and SOFI TECHNOLOGIES

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

Diversification Opportunities for Monster Beverage and SOFI TECHNOLOGIES

0.21

Correlation Coefficient

Monster Beverage  SOFI TECHNOLOGIES

Modest diversification

The 3 months correlation between Monster and SOFI is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of Monster Beverage i.e., Monster Beverage and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Monster Beverage and SOFI TECHNOLOGIES

Assuming the 90 days trading horizon Monster Beverage is expected to generate 21.91 times less return on investment than SOFI TECHNOLOGIES. But when comparing it to its historical volatility, Monster Beverage Corp is 2.81 times less risky than SOFI TECHNOLOGIES. It trades about 0.01 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  724.00  in SOFI TECHNOLOGIES on October 24, 2024 and sell it today you would earn a total of  922.00  from holding SOFI TECHNOLOGIES or generate 127.35% return on investment over 90 days.

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

Monster Beverage Corp  vs.  SOFI TECHNOLOGIES

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and SOFI TECHNOLOGIES

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

The idea behind Monster Beverage Corp and SOFI TECHNOLOGIES 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.