Correlation Between Monster Beverage and BB Biotech

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

Diversification Opportunities for Monster Beverage and BB Biotech

0.55

Correlation Coefficient

Monster Beverage  BB Biotech

Very weak diversification

The 3 months correlation between Monster and BBZA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and BB Biotech AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Biotech 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 BB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Biotech AG has no effect on the direction of Monster Beverage i.e., Monster Beverage and BB Biotech go up and down completely randomly.

Pair Corralation between Monster Beverage and BB Biotech

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.76 times more return on investment than BB Biotech. However, Monster Beverage Corp is 1.32 times less risky than BB Biotech. It trades about 0.18 of its potential returns per unit of risk. BB Biotech AG is currently generating about -0.25 per unit of risk. If you would invest  4,957  in Monster Beverage Corp on October 7, 2024 and sell it today you would earn a total of  145.00  from holding Monster Beverage Corp or generate 2.93% 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.  BB Biotech 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.

BB Biotech AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BB Biotech AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BB Biotech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Monster Beverage and BB Biotech

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

The idea behind Monster Beverage Corp and BB Biotech 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.