Correlation Between Monster Beverage and Games Workshop

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

Diversification Opportunities for Monster Beverage and Games Workshop

-0.03

Correlation Coefficient

Monster Beverage  Games Workshop

Good diversification

The 3 months correlation between Monster and Games is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Games Workshop Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Games Workshop Group 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 Games Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Games Workshop Group has no effect on the direction of Monster Beverage i.e., Monster Beverage and Games Workshop go up and down completely randomly.

Pair Corralation between Monster Beverage and Games Workshop

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Games Workshop. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.17 times less risky than Games Workshop. The stock trades about -0.31 of its potential returns per unit of risk. The Games Workshop Group is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,371,624  in Games Workshop Group on October 15, 2024 and sell it today you would lose (26,624) from holding Games Workshop Group or give up 1.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Monster Beverage Corp  vs.  Games Workshop Group

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Games Workshop Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Games Workshop exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Games Workshop

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

The idea behind Monster Beverage Corp and Games Workshop Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.