Correlation Between BlackRock and Monster Beverage

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

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

Diversification Opportunities for BlackRock and Monster Beverage

0.89

Correlation Coefficient

BlackRock  Monster Beverage

Very poor diversification

The 3 months correlation between BlackRock and Monster is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Monster Beverage go up and down completely randomly.

Pair Corralation between BlackRock and Monster Beverage

Assuming the 90 days trading horizon BlackRock is expected to generate 0.85 times more return on investment than Monster Beverage. However, BlackRock is 1.18 times less risky than Monster Beverage. It trades about 0.13 of its potential returns per unit of risk. Monster Beverage is currently generating about 0.04 per unit of risk. If you would invest  5,129  in BlackRock on October 4, 2024 and sell it today you would earn a total of  4,503  from holding BlackRock or generate 87.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.73%
Values	Daily Returns

BlackRock  vs.  Monster Beverage

BlackRock

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Monster Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Monster Beverage

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