Correlation Between Monster Beverage and NBCUNIVERSAL

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

Diversification Opportunities for Monster Beverage and NBCUNIVERSAL

0.43

Correlation Coefficient

Monster Beverage  NBCUNIVERSAL

Very weak diversification

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

Pair Corralation between Monster Beverage and NBCUNIVERSAL

Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the NBCUNIVERSAL. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.1 times less risky than NBCUNIVERSAL. The stock trades about -0.09 of its potential returns per unit of risk. The NBCUNIVERSAL MEDIA LLC is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  10,726  in NBCUNIVERSAL MEDIA LLC on October 24, 2024 and sell it today you would lose (299.00) from holding NBCUNIVERSAL MEDIA LLC or give up 2.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	51.67%
Values	Daily Returns

Monster Beverage Corp  vs.  NBCUNIVERSAL MEDIA LLC

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.

NBCUNIVERSAL MEDIA LLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Monster Beverage and NBCUNIVERSAL

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

The idea behind Monster Beverage Corp and NBCUNIVERSAL MEDIA LLC 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.