Correlation Between Monster Beverage and Adidas AG

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

Diversification Opportunities for Monster Beverage and Adidas AG

-0.45

Correlation Coefficient

Monster Beverage  Adidas AG

Very good diversification

The 3 months correlation between Monster and Adidas is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Monster Beverage i.e., Monster Beverage and Adidas AG go up and down completely randomly.

Pair Corralation between Monster Beverage and Adidas AG

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.76 times more return on investment than Adidas AG. However, Monster Beverage Corp is 1.31 times less risky than Adidas AG. It trades about 0.08 of its potential returns per unit of risk. adidas AG is currently generating about 0.04 per unit of risk. If you would invest  5,033  in Monster Beverage Corp on October 6, 2024 and sell it today you would earn a total of  69.00  from holding Monster Beverage Corp or generate 1.37% return on investment over 90 days.

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

Monster Beverage Corp  vs.  adidas AG

Monster Beverage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

adidas AG

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Monster Beverage and Adidas AG

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

The idea behind Monster Beverage Corp and adidas AG 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 Commodity Directory module to find actively traded commodities issued by global exchanges.