Correlation Between Monster Beverage and Tarena International

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

Diversification Opportunities for Monster Beverage and Tarena International

-0.12

Correlation Coefficient

Monster Beverage  Tarena International

Good diversification

The 3 months correlation between Monster and Tarena is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Tarena International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarena International 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 Tarena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarena International has no effect on the direction of Monster Beverage i.e., Monster Beverage and Tarena International go up and down completely randomly.

Pair Corralation between Monster Beverage and Tarena International

Given the investment horizon of 90 days Monster Beverage is expected to generate 15.65 times less return on investment than Tarena International. But when comparing it to its historical volatility, Monster Beverage Corp is 29.51 times less risky than Tarena International. It trades about 0.11 of its potential returns per unit of risk. Tarena International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Tarena International on December 26, 2024 and sell it today you would lose (32.00) from holding Tarena International or give up 47.06% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Tarena International

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.

Tarena International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tarena International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Tarena International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Tarena International

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

The idea behind Monster Beverage Corp and Tarena International 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.