Correlation Between Monster Beverage and ULTRA CLEAN

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

Diversification Opportunities for Monster Beverage and ULTRA CLEAN

0.02

Correlation Coefficient

Monster Beverage  ULTRA CLEAN

Significant diversification

The 3 months correlation between Monster and ULTRA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN HLDGS 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 ULTRA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULTRA CLEAN HLDGS has no effect on the direction of Monster Beverage i.e., Monster Beverage and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between Monster Beverage and ULTRA CLEAN

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.53 times more return on investment than ULTRA CLEAN. However, Monster Beverage Corp is 1.88 times less risky than ULTRA CLEAN. It trades about 0.04 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about -0.07 per unit of risk. If you would invest  4,640  in Monster Beverage Corp on October 4, 2024 and sell it today you would earn a total of  369.00  from holding Monster Beverage Corp or generate 7.95% return on investment over 90 days.

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

Monster Beverage Corp  vs.  ULTRA CLEAN HLDGS

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 comparatively fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ULTRA CLEAN HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ULTRA CLEAN is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Monster Beverage and ULTRA CLEAN

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

The idea behind Monster Beverage Corp and ULTRA CLEAN HLDGS 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 Global Correlations module to find global opportunities by holding instruments from different markets.