Correlation Between Annaly Capital and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both Annaly Capital and Monster Beverage 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 Annaly Capital and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Annaly Capital Management, and Monster Beverage, you can compare the effects of market volatilities on Annaly Capital and Monster Beverage 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 Annaly Capital with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and Monster Beverage.

Diversification Opportunities for Annaly Capital and Monster Beverage

0.49

Correlation Coefficient

Annaly Capital  Monster Beverage

Very weak diversification

The 3 months correlation between Annaly and Monster is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management, and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and Annaly Capital 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 Annaly Capital Management, are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage has no effect on the direction of Annaly Capital i.e., Annaly Capital and Monster Beverage go up and down completely randomly.

Pair Corralation between Annaly Capital and Monster Beverage

Assuming the 90 days trading horizon Annaly Capital Management, is expected to under-perform the Monster Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Annaly Capital Management, is 1.23 times less risky than Monster Beverage. The stock trades about -0.13 of its potential returns per unit of risk. The Monster Beverage is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,068  in Monster Beverage on October 5, 2024 and sell it today you would lose (48.00) from holding Monster Beverage or give up 1.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Annaly Capital Management,  vs.  Monster Beverage

Annaly Capital Manag

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Annaly Capital Management, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak essential indicators, Annaly Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Monster Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Annaly Capital and Monster Beverage

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

The idea behind Annaly Capital Management, and Monster Beverage 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.