Correlation Between Monster Beverage and BlackRock

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and BlackRock 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 BlackRock 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 BlackRock, you can compare the effects of market volatilities on Monster Beverage and BlackRock 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 BlackRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and BlackRock.

Diversification Opportunities for Monster Beverage and BlackRock

0.31

Correlation Coefficient

Monster Beverage  BlackRock

Weak diversification

The 3 months correlation between Monster and BlackRock is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Monster Beverage i.e., Monster Beverage and BlackRock go up and down completely randomly.

Pair Corralation between Monster Beverage and BlackRock

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the BlackRock. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.32 times less risky than BlackRock. The stock trades about -0.09 of its potential returns per unit of risk. The BlackRock is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,932,880  in BlackRock on October 25, 2024 and sell it today you would earn a total of  127,120  from holding BlackRock or generate 6.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Monster Beverage Corp  vs.  BlackRock

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

BlackRock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BlackRock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Monster Beverage and BlackRock

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

The idea behind Monster Beverage Corp and BlackRock 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.