Correlation Between United Rentals and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both United Rentals 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 United Rentals and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Monster Beverage, you can compare the effects of market volatilities on United Rentals 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 United Rentals with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Monster Beverage.
Diversification Opportunities for United Rentals and Monster Beverage
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Monster is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and United Rentals 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 United Rentals 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 United Rentals i.e., United Rentals and Monster Beverage go up and down completely randomly.
Pair Corralation between United Rentals and Monster Beverage
Assuming the 90 days trading horizon United Rentals is expected to generate 2.36 times more return on investment than Monster Beverage. However, United Rentals is 2.36 times more volatile than Monster Beverage. It trades about 0.16 of its potential returns per unit of risk. Monster Beverage is currently generating about 0.21 per unit of risk. If you would invest 16,684 in United Rentals on September 2, 2024 and sell it today you would earn a total of 1,929 from holding United Rentals or generate 11.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. Monster Beverage
Performance |
| Timeline |
| United Rentals |
| Monster Beverage |
United Rentals and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Monster Beverage
The main advantage of trading using opposite United Rentals and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals 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.| United Rentals vs. Localiza Rent a | United Rentals vs. Vamos Locao de | United Rentals vs. Movida Participaes SA |
| Monster Beverage vs. G2D Investments | Monster Beverage vs. Healthpeak Properties | Monster Beverage vs. Paycom Software | Monster Beverage vs. Costco Wholesale |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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