Correlation Between Monster Beverage and Cadence Design

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

Diversification Opportunities for Monster Beverage and Cadence Design

-0.71

Correlation Coefficient

Monster Beverage  Cadence Design

Pay attention - limited upside

The 3 months correlation between Monster and Cadence is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems 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 Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Monster Beverage i.e., Monster Beverage and Cadence Design go up and down completely randomly.

Pair Corralation between Monster Beverage and Cadence Design

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 0.61 times more return on investment than Cadence Design. However, Monster Beverage Corp is 1.64 times less risky than Cadence Design. It trades about 0.11 of its potential returns per unit of risk. Cadence Design Systems is currently generating about -0.09 per unit of risk. If you would invest  5,253  in Monster Beverage Corp on December 28, 2024 and sell it today you would earn a total of  533.00  from holding Monster Beverage Corp or generate 10.15% 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.  Cadence Design Systems

Monster Beverage Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cadence Design Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadence Design Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Monster Beverage and Cadence Design

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

The idea behind Monster Beverage Corp and Cadence Design Systems 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.