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 Corp 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

-0.79

Correlation Coefficient

Monster Beverage  Morgan Stanley

Pay attention - limited upside

The 3 months correlation between Monster and Morgan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp 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 Corp 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 Corp is expected to generate 0.96 times more return on investment than Morgan Stanley. However, Monster Beverage Corp is 1.04 times less risky than Morgan Stanley. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley is currently generating about -0.06 per unit of risk. If you would invest  108,671  in Monster Beverage Corp on December 30, 2024 and sell it today you would earn a total of  10,329  from holding Monster Beverage Corp or generate 9.5% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Morgan Stanley

Monster Beverage Corp

Risk-Adjusted Performance

Modest

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

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.