Correlation Between Monster Beverage and Baidu

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

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

Diversification Opportunities for Monster Beverage and Baidu

-0.7

Correlation Coefficient

Monster Beverage  Baidu

Excellent diversification

The 3 months correlation between Monster and Baidu is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc 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 Corp are associated (or correlated) with Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Baidu go up and down completely randomly.

Pair Corralation between Monster Beverage and Baidu

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.59 times more return on investment than Baidu. However, Monster Beverage Corp is 1.69 times less risky than Baidu. It trades about -0.03 of its potential returns per unit of risk. Baidu Inc is currently generating about -0.37 per unit of risk. If you would invest  105,500  in Monster Beverage Corp on October 14, 2024 and sell it today you would lose (800.00) from holding Monster Beverage Corp or give up 0.76% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Baidu Inc

Monster Beverage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baidu Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baidu Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Monster Beverage and Baidu

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

The idea behind Monster Beverage Corp and Baidu Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..