Correlation Between Monster Beverage and Morgan Stanley

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

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

Diversification Opportunities for Monster Beverage and Morgan Stanley

0.57

Correlation Coefficient

Monster Beverage  Morgan Stanley

Very weak diversification

The 3 months correlation between Monster and Morgan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Monster Beverage i.e., Monster Beverage and Morgan Stanley go up and down completely randomly.

Pair Corralation between Monster Beverage and Morgan Stanley

Assuming the 90 days trading horizon Monster Beverage is expected to generate 0.73 times more return on investment than Morgan Stanley. However, Monster Beverage is 1.38 times less risky than Morgan Stanley. It trades about 0.07 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.0 per unit of risk. If you would invest  4,004  in Monster Beverage on October 6, 2024 and sell it today you would earn a total of  85.00  from holding Monster Beverage or generate 2.12% return on investment over 90 days.

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

Monster Beverage  vs.  Morgan Stanley

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.

Morgan Stanley

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Morgan Stanley sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Morgan Stanley

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

The idea behind Monster Beverage and Morgan Stanley 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.