Correlation Between Wah Fu and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both Wah Fu 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 Wah Fu and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wah Fu Education and Monster Beverage Corp, you can compare the effects of market volatilities on Wah Fu 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 Wah Fu with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Fu and Monster Beverage.

Diversification Opportunities for Wah Fu and Monster Beverage

-0.44

Correlation Coefficient

Wah Fu  Monster Beverage

Very good diversification

The 3 months correlation between Wah and Monster is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wah Fu Education and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Wah Fu 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 Wah Fu Education 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 Corp has no effect on the direction of Wah Fu i.e., Wah Fu and Monster Beverage go up and down completely randomly.

Pair Corralation between Wah Fu and Monster Beverage

Given the investment horizon of 90 days Wah Fu Education is expected to under-perform the Monster Beverage. In addition to that, Wah Fu is 2.64 times more volatile than Monster Beverage Corp. It trades about -0.04 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.16 per unit of volatility. If you would invest  4,713  in Monster Beverage Corp on August 30, 2024 and sell it today you would earn a total of  801.00  from holding Monster Beverage Corp or generate 17.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Wah Fu Education  vs.  Monster Beverage Corp

Wah Fu Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wah Fu Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Monster Beverage Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wah Fu and Monster Beverage

The main advantage of trading using opposite Wah Fu and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Fu 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.

The idea behind Wah Fu Education and Monster Beverage Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.