Correlation Between Monster Beverage and Hewlett Packard

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

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

Diversification Opportunities for Monster Beverage and Hewlett Packard

-0.3

Correlation Coefficient

Monster Beverage  Hewlett Packard

Very good diversification

The 3 months correlation between Monster and Hewlett is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Hewlett Packard Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hewlett Packard Ente 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 are associated (or correlated) with Hewlett Packard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hewlett Packard Ente has no effect on the direction of Monster Beverage i.e., Monster Beverage and Hewlett Packard go up and down completely randomly.

Pair Corralation between Monster Beverage and Hewlett Packard

Assuming the 90 days trading horizon Monster Beverage is expected to generate 0.56 times more return on investment than Hewlett Packard. However, Monster Beverage is 1.79 times less risky than Hewlett Packard. It trades about 0.03 of its potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about -0.16 per unit of risk. If you would invest  4,056  in Monster Beverage on December 25, 2024 and sell it today you would earn a total of  85.00  from holding Monster Beverage or generate 2.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Monster Beverage  vs.  Hewlett Packard Enterprise

Monster Beverage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Monster Beverage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Hewlett Packard Ente

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hewlett Packard Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Monster Beverage and Hewlett Packard

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

The idea behind Monster Beverage and Hewlett Packard Enterprise 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 Transaction History module to view history of all your transactions and understand their impact on performance.