Correlation Between Monster Beverage and STRAYER EDUCATION
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and STRAYER EDUCATION 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 STRAYER EDUCATION 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 STRAYER EDUCATION, you can compare the effects of market volatilities on Monster Beverage and STRAYER EDUCATION 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 STRAYER EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and STRAYER EDUCATION.
Diversification Opportunities for Monster Beverage and STRAYER EDUCATION
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Monster and STRAYER is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER EDUCATION 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 STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of Monster Beverage i.e., Monster Beverage and STRAYER EDUCATION go up and down completely randomly.
Pair Corralation between Monster Beverage and STRAYER EDUCATION
Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the STRAYER EDUCATION. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.52 times less risky than STRAYER EDUCATION. The stock trades about -0.02 of its potential returns per unit of risk. The STRAYER EDUCATION is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8,531 in STRAYER EDUCATION on October 29, 2024 and sell it today you would earn a total of 719.00 from holding STRAYER EDUCATION or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. STRAYER EDUCATION
Performance |
| Timeline |
| Monster Beverage Corp |
| STRAYER EDUCATION |
Monster Beverage and STRAYER EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and STRAYER EDUCATION
The main advantage of trading using opposite Monster Beverage and STRAYER EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, STRAYER EDUCATION 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 STRAYER EDUCATION will offset losses from the drop in STRAYER EDUCATION's long position.| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc |
| STRAYER EDUCATION vs. Apple Inc | STRAYER EDUCATION vs. Apple Inc | STRAYER EDUCATION vs. Apple Inc | STRAYER EDUCATION vs. Apple Inc |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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