Correlation Between Monster Beverage and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Hon Hai 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 Hon Hai 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 Hon Hai Precision, you can compare the effects of market volatilities on Monster Beverage and Hon Hai 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 Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Hon Hai.
Diversification Opportunities for Monster Beverage and Hon Hai
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Hon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision 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 Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of Monster Beverage i.e., Monster Beverage and Hon Hai go up and down completely randomly.
Pair Corralation between Monster Beverage and Hon Hai
Assuming the 90 days trading horizon Monster Beverage is expected to generate 54.82 times less return on investment than Hon Hai. But when comparing it to its historical volatility, Monster Beverage Corp is 1.68 times less risky than Hon Hai. It trades about 0.0 of its potential returns per unit of risk. Hon Hai Precision is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 604.00 in Hon Hai Precision on September 4, 2024 and sell it today you would earn a total of 598.00 from holding Hon Hai Precision or generate 99.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.81% |
| Values | Daily Returns |
Monster Beverage Corp vs. Hon Hai Precision
Performance |
| Timeline |
| Monster Beverage Corp |
| Hon Hai Precision |
Monster Beverage and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Hon Hai
The main advantage of trading using opposite Monster Beverage and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Hon Hai 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 Hon Hai will offset losses from the drop in Hon Hai's long position.| Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Hyundai Motor | Monster Beverage vs. Toyota Motor Corp |
| Hon Hai vs. National Beverage Corp | Hon Hai vs. Auction Technology Group | Hon Hai vs. Monster Beverage Corp | Hon Hai vs. Pfeiffer Vacuum Technology |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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