Correlation Between Monster Beverage and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and FARO Technologies 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 FARO Technologies 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 FARO Technologies, you can compare the effects of market volatilities on Monster Beverage and FARO Technologies 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 FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and FARO Technologies.
Diversification Opportunities for Monster Beverage and FARO Technologies
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and FARO is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies 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 FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of Monster Beverage i.e., Monster Beverage and FARO Technologies go up and down completely randomly.
Pair Corralation between Monster Beverage and FARO Technologies
Given the investment horizon of 90 days Monster Beverage is expected to generate 7.97 times less return on investment than FARO Technologies. But when comparing it to its historical volatility, Monster Beverage Corp is 4.06 times less risky than FARO Technologies. It trades about 0.13 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,769 in FARO Technologies on September 2, 2024 and sell it today you would earn a total of 856.00 from holding FARO Technologies or generate 48.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. FARO Technologies
Performance |
| Timeline |
| Monster Beverage Corp |
| FARO Technologies |
Monster Beverage and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and FARO Technologies
The main advantage of trading using opposite Monster Beverage and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, FARO Technologies 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 FARO Technologies will offset losses from the drop in FARO Technologies' long position.| Monster Beverage vs. Vita Coco | Monster Beverage vs. PepsiCo | Monster Beverage vs. The Coca Cola | Monster Beverage vs. Coca Cola Femsa SAB |
| FARO Technologies vs. Coherent | FARO Technologies vs. ESCO Technologies | FARO Technologies vs. Mesa Laboratories | FARO Technologies vs. Vishay Precision Group |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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