Correlation Between Monster Beverage and Hercules Capital

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

Diversification Opportunities for Monster Beverage and Hercules Capital

0.5

Correlation Coefficient

Monster Beverage  Hercules Capital

Very weak diversification

The 3 months correlation between Monster and Hercules is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital 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 Hercules Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Capital has no effect on the direction of Monster Beverage i.e., Monster Beverage and Hercules Capital go up and down completely randomly.

Pair Corralation between Monster Beverage and Hercules Capital

Assuming the 90 days trading horizon Monster Beverage is expected to generate 6.15 times less return on investment than Hercules Capital. But when comparing it to its historical volatility, Monster Beverage Corp is 1.24 times less risky than Hercules Capital. It trades about 0.02 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,026  in Hercules Capital on October 4, 2024 and sell it today you would earn a total of  886.00  from holding Hercules Capital or generate 86.35% 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.  Hercules Capital

Monster Beverage Corp

Risk-Adjusted Performance

8 of 100

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 fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hercules Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hercules Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Monster Beverage and Hercules Capital

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

The idea behind Monster Beverage Corp and Hercules Capital 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 Anywhere module to track or share privately all of your investments from the convenience of any device.