Correlation Between Check Point and Monster Beverage

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

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

Diversification Opportunities for Check Point and Monster Beverage

-0.26

Correlation Coefficient

Check Point  Monster Beverage

Very good diversification

The 3 months correlation between Check and Monster is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software 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 Check Point 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 Check Point Software 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 Check Point i.e., Check Point and Monster Beverage go up and down completely randomly.

Pair Corralation between Check Point and Monster Beverage

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.02 times more return on investment than Monster Beverage. However, Check Point is 1.02 times more volatile than Monster Beverage Corp. It trades about 0.06 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.02 per unit of risk. If you would invest  12,136  in Check Point Software on October 10, 2024 and sell it today you would earn a total of  5,399  from holding Check Point Software or generate 44.49% return on investment over 90 days.

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

Check Point Software  vs.  Monster Beverage Corp

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Check Point is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Monster Beverage Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Check Point and Monster Beverage

The main advantage of trading using opposite Check Point and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point 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 Check Point Software 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.