Correlation Between Monster Beverage and NETGEAR

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

Diversification Opportunities for Monster Beverage and NETGEAR

0.42

Correlation Coefficient

Monster Beverage  NETGEAR

Very weak diversification

The 3 months correlation between Monster and NETGEAR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Monster Beverage i.e., Monster Beverage and NETGEAR go up and down completely randomly.

Pair Corralation between Monster Beverage and NETGEAR

Given the investment horizon of 90 days Monster Beverage is expected to generate 14.25 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Monster Beverage Corp is 2.15 times less risky than NETGEAR. It trades about 0.02 of its potential returns per unit of risk. NETGEAR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,498  in NETGEAR on September 23, 2024 and sell it today you would earn a total of  1,302  from holding NETGEAR or generate 86.92% 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.  NETGEAR

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and NETGEAR

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

The idea behind Monster Beverage Corp and NETGEAR 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.