Correlation Between Sumitomo Mitsui and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui 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 Sumitomo Mitsui and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Financial and Monster Beverage, you can compare the effects of market volatilities on Sumitomo Mitsui 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 Sumitomo Mitsui with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Monster Beverage.
Diversification Opportunities for Sumitomo Mitsui and Monster Beverage
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Monster is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and Sumitomo Mitsui 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 Sumitomo Mitsui Financial 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 has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Monster Beverage go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Monster Beverage
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 1.05 times more return on investment than Monster Beverage. However, Sumitomo Mitsui is 1.05 times more volatile than Monster Beverage. It trades about 0.38 of its potential returns per unit of risk. Monster Beverage is currently generating about 0.21 per unit of risk. If you would invest 7,378 in Sumitomo Mitsui Financial on August 31, 2024 and sell it today you would earn a total of 1,034 from holding Sumitomo Mitsui Financial or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Monster Beverage
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Monster Beverage |
Sumitomo Mitsui and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Monster Beverage
The main advantage of trading using opposite Sumitomo Mitsui and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui 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.| Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Western Digital | Sumitomo Mitsui vs. Energisa SA |
| Monster Beverage vs. Fras le SA | Monster Beverage vs. Energisa SA | Monster Beverage vs. Clave Indices De | Monster Beverage vs. BTG Pactual Logstica |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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