Correlation Between Monster Beverage and UNICHARM

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

Diversification Opportunities for Monster Beverage and UNICHARM

-0.04

Correlation Coefficient

Monster Beverage  UNICHARM

Good diversification

The 3 months correlation between Monster and UNICHARM is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and UNICHARM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNICHARM 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 UNICHARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNICHARM has no effect on the direction of Monster Beverage i.e., Monster Beverage and UNICHARM go up and down completely randomly.

Pair Corralation between Monster Beverage and UNICHARM

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.94 times more return on investment than UNICHARM. However, Monster Beverage Corp is 1.07 times less risky than UNICHARM. It trades about 0.06 of its potential returns per unit of risk. UNICHARM is currently generating about -0.09 per unit of risk. If you would invest  4,956  in Monster Beverage Corp on December 22, 2024 and sell it today you would earn a total of  246.00  from holding Monster Beverage Corp or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Monster Beverage Corp  vs.  UNICHARM

Monster Beverage Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

UNICHARM

Risk-Adjusted Performance

Very Weak

Over the last 90 days UNICHARM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Monster Beverage and UNICHARM

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

The idea behind Monster Beverage Corp and UNICHARM 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.