Correlation Between Monster Beverage and Mount Gibson

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

Diversification Opportunities for Monster Beverage and Mount Gibson

-0.49

Correlation Coefficient

Monster Beverage  Mount Gibson

Very good diversification

The 3 months correlation between Monster and Mount is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron 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 Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Monster Beverage i.e., Monster Beverage and Mount Gibson go up and down completely randomly.

Pair Corralation between Monster Beverage and Mount Gibson

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.12 times less return on investment than Mount Gibson. But when comparing it to its historical volatility, Monster Beverage Corp is 2.91 times less risky than Mount Gibson. It trades about 0.06 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Mount Gibson Iron on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Mount Gibson Iron or generate 0.0% 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.  Mount Gibson Iron

Monster Beverage Corp

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Mount Gibson Iron

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mount Gibson Iron are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mount Gibson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Monster Beverage and Mount Gibson

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

The idea behind Monster Beverage Corp and Mount Gibson Iron 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.