Correlation Between Monster Beverage and JB Hunt

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

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

Diversification Opportunities for Monster Beverage and JB Hunt

0.78

Correlation Coefficient

Monster Beverage  JB Hunt

Poor diversification

The 3 months correlation between Monster and J1BH34 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and JB Hunt Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Hunt Transport 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 JB Hunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Hunt Transport has no effect on the direction of Monster Beverage i.e., Monster Beverage and JB Hunt go up and down completely randomly.

Pair Corralation between Monster Beverage and JB Hunt

Assuming the 90 days trading horizon Monster Beverage is expected to generate 61.69 times more return on investment than JB Hunt. However, Monster Beverage is 61.69 times more volatile than JB Hunt Transport. It trades about 0.09 of its potential returns per unit of risk. JB Hunt Transport is currently generating about 0.16 per unit of risk. If you would invest  3,880  in Monster Beverage on October 6, 2024 and sell it today you would earn a total of  209.00  from holding Monster Beverage or generate 5.39% return on investment over 90 days.

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

Monster Beverage  vs.  JB Hunt Transport

Monster Beverage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 16 (%) 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.

JB Hunt Transport

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hunt Transport are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, JB Hunt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and JB Hunt

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

The idea behind Monster Beverage and JB Hunt Transport 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 Commodity Directory module to find actively traded commodities issued by global exchanges.