Correlation Between Monster Beverage and SYSTEMAIR

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

Diversification Opportunities for Monster Beverage and SYSTEMAIR

0.28

Correlation Coefficient

Monster Beverage  SYSTEMAIR

Modest diversification

The 3 months correlation between Monster and SYSTEMAIR is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of Monster Beverage i.e., Monster Beverage and SYSTEMAIR go up and down completely randomly.

Pair Corralation between Monster Beverage and SYSTEMAIR

Assuming the 90 days trading horizon Monster Beverage is expected to generate 8.13 times less return on investment than SYSTEMAIR. But when comparing it to its historical volatility, Monster Beverage Corp is 2.04 times less risky than SYSTEMAIR. It trades about 0.01 of its potential returns per unit of risk. SYSTEMAIR AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  454.00  in SYSTEMAIR AB on October 15, 2024 and sell it today you would earn a total of  286.00  from holding SYSTEMAIR AB or generate 63.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Monster Beverage Corp  vs.  SYSTEMAIR AB

Monster Beverage Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

SYSTEMAIR AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SYSTEMAIR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Monster Beverage and SYSTEMAIR

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

The idea behind Monster Beverage Corp and SYSTEMAIR AB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.