Correlation Between Monster Beverage and Daimler Truck

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

Diversification Opportunities for Monster Beverage and Daimler Truck

-0.17

Correlation Coefficient

Monster Beverage  Daimler Truck

Good diversification

The 3 months correlation between Monster and Daimler is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Daimler Truck Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daimler Truck Holding 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 Daimler Truck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daimler Truck Holding has no effect on the direction of Monster Beverage i.e., Monster Beverage and Daimler Truck go up and down completely randomly.

Pair Corralation between Monster Beverage and Daimler Truck

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate about the same return on investment as Daimler Truck Holding. But, Monster Beverage Corp is 1.46 times less risky than Daimler Truck. It trades about 0.07 of its potential returns per unit of risk. Daimler Truck Holding is currently generating about 0.05 per unit of risk. If you would invest  3,656  in Daimler Truck Holding on December 23, 2024 and sell it today you would earn a total of  210.00  from holding Daimler Truck Holding or generate 5.74% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Daimler Truck Holding

Monster Beverage Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 5 (%) 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 April 2025.

Daimler Truck Holding

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Daimler Truck may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Monster Beverage and Daimler Truck

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

The idea behind Monster Beverage Corp and Daimler Truck Holding 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.