Correlation Between Monster Beverage and Ross Stores

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

Diversification Opportunities for Monster Beverage and Ross Stores

-0.74

Correlation Coefficient

Monster Beverage  Ross Stores

Pay attention - limited upside

The 3 months correlation between Monster and Ross is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Monster Beverage i.e., Monster Beverage and Ross Stores go up and down completely randomly.

Pair Corralation between Monster Beverage and Ross Stores

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.83 times more return on investment than Ross Stores. However, Monster Beverage Corp is 1.2 times less risky than Ross Stores. It trades about -0.07 of its potential returns per unit of risk. Ross Stores is currently generating about -0.3 per unit of risk. If you would invest  113,500  in Monster Beverage Corp on December 1, 2024 and sell it today you would lose (7,825) from holding Monster Beverage Corp or give up 6.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	32.79%
Values	Daily Returns

Monster Beverage Corp  vs.  Ross Stores

Monster Beverage Corp

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Monster Beverage and Ross Stores

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

The idea behind Monster Beverage Corp and Ross Stores 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.