Correlation Between Monster Beverage and United Parcel

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

Diversification Opportunities for Monster Beverage and United Parcel

0.54

Correlation Coefficient

Monster Beverage  United Parcel

Very weak diversification

The 3 months correlation between Monster and United is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Monster Beverage i.e., Monster Beverage and United Parcel go up and down completely randomly.

Pair Corralation between Monster Beverage and United Parcel

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.78 times more return on investment than United Parcel. However, Monster Beverage Corp is 1.28 times less risky than United Parcel. It trades about 0.0 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.07 per unit of risk. If you would invest  109,137  in Monster Beverage Corp on October 7, 2024 and sell it today you would lose (48.00) from holding Monster Beverage Corp or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

Monster Beverage Corp  vs.  United Parcel Service

Monster Beverage Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Monster Beverage showed solid returns over the last few months and may actually be approaching a breakup point.

United Parcel Service

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, United Parcel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and United Parcel

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

The idea behind Monster Beverage Corp and United Parcel Service 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.