Correlation Between Monster Beverage and Host Hotels

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Host Hotels 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 Host Hotels 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 Host Hotels Resorts, you can compare the effects of market volatilities on Monster Beverage and Host Hotels 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 Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Host Hotels.

Diversification Opportunities for Monster Beverage and Host Hotels

0.24

Correlation Coefficient

Monster Beverage  Host Hotels

Modest diversification

The 3 months correlation between Monster and Host is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts 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 Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of Monster Beverage i.e., Monster Beverage and Host Hotels go up and down completely randomly.

Pair Corralation between Monster Beverage and Host Hotels

Assuming the 90 days trading horizon Monster Beverage is expected to generate 2.69 times less return on investment than Host Hotels. In addition to that, Monster Beverage is 1.01 times more volatile than Host Hotels Resorts. It trades about 0.02 of its total potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.05 per unit of volatility. If you would invest  1,761  in Host Hotels Resorts on September 28, 2024 and sell it today you would earn a total of  65.00  from holding Host Hotels Resorts or generate 3.69% 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.  Host Hotels Resorts

Monster Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Host Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Host Hotels is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Monster Beverage and Host Hotels

The main advantage of trading using opposite Monster Beverage and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Host Hotels 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 Host Hotels will offset losses from the drop in Host Hotels' long position.

The idea behind Monster Beverage Corp and Host Hotels Resorts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.