Correlation Between Monster Beverage and NVIDIA

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

Diversification Opportunities for Monster Beverage and NVIDIA

0.45

Correlation Coefficient

Monster Beverage  NVIDIA

Very weak diversification

The 3 months correlation between Monster and NVIDIA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Monster Beverage i.e., Monster Beverage and NVIDIA go up and down completely randomly.

Pair Corralation between Monster Beverage and NVIDIA

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the NVIDIA. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 2.1 times less risky than NVIDIA. The stock trades about -0.04 of its potential returns per unit of risk. The NVIDIA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  276,874  in NVIDIA on October 23, 2024 and sell it today you would earn a total of  12,425  from holding NVIDIA or generate 4.49% return on investment over 90 days.

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

Monster Beverage Corp  vs.  NVIDIA

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.

NVIDIA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NVIDIA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and NVIDIA

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

The idea behind Monster Beverage Corp and NVIDIA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.