Correlation Between Monster Beverage and Neogen

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

Diversification Opportunities for Monster Beverage and Neogen

0.62

Correlation Coefficient

Monster Beverage  Neogen

Poor diversification

The 3 months correlation between Monster and Neogen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Neogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogen 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 Neogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogen has no effect on the direction of Monster Beverage i.e., Monster Beverage and Neogen go up and down completely randomly.

Pair Corralation between Monster Beverage and Neogen

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 0.88 times more return on investment than Neogen. However, Monster Beverage Corp is 1.13 times less risky than Neogen. It trades about 0.29 of its potential returns per unit of risk. Neogen is currently generating about -0.27 per unit of risk. If you would invest  4,871  in Monster Beverage Corp on December 2, 2024 and sell it today you would earn a total of  594.00  from holding Monster Beverage Corp or generate 12.19% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Neogen

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 comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Neogen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Monster Beverage and Neogen

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

The idea behind Monster Beverage Corp and Neogen 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.