Correlation Between Monster Beverage and Sonos
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Sonos 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 Sonos 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 Sonos Inc, you can compare the effects of market volatilities on Monster Beverage and Sonos 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 Sonos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Sonos.
Diversification Opportunities for Monster Beverage and Sonos
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Monster and Sonos is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc 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 Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Sonos go up and down completely randomly.
Pair Corralation between Monster Beverage and Sonos
Given the investment horizon of 90 days Monster Beverage is expected to generate 2.6 times less return on investment than Sonos. But when comparing it to its historical volatility, Monster Beverage Corp is 2.72 times less risky than Sonos. It trades about 0.13 of its potential returns per unit of risk. Sonos Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,656 in Sonos Inc on December 29, 2023 and sell it today you would earn a total of 266.00 from holding Sonos Inc or generate 16.06% 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. Sonos Inc
Performance |
Timeline |
Monster Beverage Corp |
Sonos Inc |
Monster Beverage and Sonos Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Monster Beverage and Sonos
The main advantage of trading using opposite Monster Beverage and Sonos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Sonos 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 Sonos will offset losses from the drop in Sonos' long position.Monster Beverage vs. National Beverage Corp | Monster Beverage vs. Vindicator Silver Lead Mining | Monster Beverage vs. Ioneer Ltd American | Monster Beverage vs. Dyadic International |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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