Correlation Between Monster Beverage and Dominos Pizza

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

Diversification Opportunities for Monster Beverage and Dominos Pizza

0.08

Correlation Coefficient

Monster Beverage  Dominos Pizza

Significant diversification

The 3 months correlation between Monster and Dominos is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Dominos Pizza Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Common 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 Dominos Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Common has no effect on the direction of Monster Beverage i.e., Monster Beverage and Dominos Pizza go up and down completely randomly.

Pair Corralation between Monster Beverage and Dominos Pizza

Given the investment horizon of 90 days Monster Beverage is expected to generate 1.07 times less return on investment than Dominos Pizza. But when comparing it to its historical volatility, Monster Beverage Corp is 1.41 times less risky than Dominos Pizza. It trades about 0.11 of its potential returns per unit of risk. Dominos Pizza Common is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  42,481  in Dominos Pizza Common on December 21, 2024 and sell it today you would earn a total of  4,124  from holding Dominos Pizza Common or generate 9.71% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Dominos Pizza Common

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.

Dominos Pizza Common

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Monster Beverage and Dominos Pizza

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

The idea behind Monster Beverage Corp and Dominos Pizza Common 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.