Correlation Between Monster Beverage and Macys

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

Diversification Opportunities for Monster Beverage and Macys

0.4

Correlation Coefficient

Monster Beverage  Macys

Very weak diversification

The 3 months correlation between Monster and Macys is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Macys go up and down completely randomly.

Pair Corralation between Monster Beverage and Macys

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.48 times more return on investment than Macys. However, Monster Beverage Corp is 2.09 times less risky than Macys. It trades about 0.02 of its potential returns per unit of risk. Macys Inc is currently generating about 0.0 per unit of risk. If you would invest  4,595  in Monster Beverage Corp on October 11, 2024 and sell it today you would earn a total of  373.00  from holding Monster Beverage Corp or generate 8.12% 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.  Macys Inc

Monster Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 4 (%) 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.

Macys Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Macys reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Macys

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

The idea behind Monster Beverage Corp and Macys Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.