Correlation Between New Residential and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both New Residential 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 New Residential and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Monster Beverage Corp, you can compare the effects of market volatilities on New Residential 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 New Residential with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Monster Beverage.
Diversification Opportunities for New Residential and Monster Beverage
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Monster is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and New Residential 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 New Residential Investment 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 Corp has no effect on the direction of New Residential i.e., New Residential and Monster Beverage go up and down completely randomly.
Pair Corralation between New Residential and Monster Beverage
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.76 times more return on investment than Monster Beverage. However, New Residential Investment is 1.31 times less risky than Monster Beverage. It trades about 0.09 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.01 per unit of risk. If you would invest 745.00 in New Residential Investment on August 28, 2024 and sell it today you would earn a total of 307.00 from holding New Residential Investment or generate 41.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.72% |
| Values | Daily Returns |
New Residential Investment vs. Monster Beverage Corp
Performance |
| Timeline |
| New Residential Inve |
| Monster Beverage Corp |
New Residential and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Monster Beverage
The main advantage of trading using opposite New Residential and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential 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.| New Residential vs. Xtrackers ShortDAX | New Residential vs. Xtrackers LevDAX | New Residential vs. Lyxor 1 |
| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Microsoft | Monster Beverage vs. Microsoft |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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