Correlation Between Monster Beverage and Samsung Electronics

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

Diversification Opportunities for Monster Beverage and Samsung Electronics

0.56

Correlation Coefficient

Monster Beverage  Samsung Electronics

Very weak diversification

The 3 months correlation between Monster and Samsung is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Monster Beverage i.e., Monster Beverage and Samsung Electronics go up and down completely randomly.

Pair Corralation between Monster Beverage and Samsung Electronics

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Samsung Electronics. In addition to that, Monster Beverage is 1.07 times more volatile than Samsung Electronics Co. It trades about -0.07 of its total potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.06 per unit of volatility. If you would invest  1,992,506  in Samsung Electronics Co on December 1, 2024 and sell it today you would earn a total of  90,494  from holding Samsung Electronics Co or generate 4.54% 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.  Samsung Electronics Co

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.

Samsung Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and Samsung Electronics

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

The idea behind Monster Beverage Corp and Samsung Electronics Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.