Correlation Between Monster Beverage and 48203RAM6

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and 48203RAM6 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 48203RAM6 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 US48203RAM60, you can compare the effects of market volatilities on Monster Beverage and 48203RAM6 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 48203RAM6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and 48203RAM6.

Diversification Opportunities for Monster Beverage and 48203RAM6

0.43

Correlation Coefficient

Monster Beverage  48203RAM6

Very weak diversification

The 3 months correlation between Monster and 48203RAM6 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and US48203RAM60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US48203RAM60 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 48203RAM6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US48203RAM60 has no effect on the direction of Monster Beverage i.e., Monster Beverage and 48203RAM6 go up and down completely randomly.

Pair Corralation between Monster Beverage and 48203RAM6

Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the 48203RAM6. In addition to that, Monster Beverage is 2.22 times more volatile than US48203RAM60. It trades about -0.43 of its total potential returns per unit of risk. US48203RAM60 is currently generating about -0.07 per unit of volatility. If you would invest  9,465  in US48203RAM60 on October 25, 2024 and sell it today you would lose (62.00) from holding US48203RAM60 or give up 0.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Monster Beverage Corp  vs.  US48203RAM60

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

US48203RAM60

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US48203RAM60 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 48203RAM6 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and 48203RAM6

The main advantage of trading using opposite Monster Beverage and 48203RAM6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, 48203RAM6 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 48203RAM6 will offset losses from the drop in 48203RAM6's long position.

The idea behind Monster Beverage Corp and US48203RAM60 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.