Correlation Between Monster Beverage and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Sunstone Hotel 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 Sunstone Hotel 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 Sunstone Hotel Investors, you can compare the effects of market volatilities on Monster Beverage and Sunstone Hotel 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 Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Sunstone Hotel.
Diversification Opportunities for Monster Beverage and Sunstone Hotel
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monster and Sunstone is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors 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 Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of Monster Beverage i.e., Monster Beverage and Sunstone Hotel go up and down completely randomly.
Pair Corralation between Monster Beverage and Sunstone Hotel
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.97 times more return on investment than Sunstone Hotel. However, Monster Beverage Corp is 1.03 times less risky than Sunstone Hotel. It trades about 0.2 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.16 per unit of risk. If you would invest 4,822 in Monster Beverage Corp on September 2, 2024 and sell it today you would earn a total of 413.00 from holding Monster Beverage Corp or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Sunstone Hotel Investors
Performance |
| Timeline |
| Monster Beverage Corp |
| Sunstone Hotel Investors |
Monster Beverage and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Sunstone Hotel
The main advantage of trading using opposite Monster Beverage and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Sunstone Hotel 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 Sunstone Hotel will offset losses from the drop in Sunstone Hotel's long position.| Monster Beverage vs. Southwest Airlines Co | Monster Beverage vs. American Airlines Group | Monster Beverage vs. Aegean Airlines SA | Monster Beverage vs. AEGEAN AIRLINES |
| Sunstone Hotel vs. Nippon Steel | Sunstone Hotel vs. VIAPLAY GROUP AB | Sunstone Hotel vs. ALGOMA STEEL GROUP | Sunstone Hotel vs. Perma Fix Environmental Services |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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