Correlation Between Monster Beverage and GBS Software

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

Diversification Opportunities for Monster Beverage and GBS Software

0.0

Correlation Coefficient

Monster Beverage  GBS Software

Pay attention - limited upside

The 3 months correlation between Monster and GBS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and GBS Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBS Software 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 GBS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBS Software AG has no effect on the direction of Monster Beverage i.e., Monster Beverage and GBS Software go up and down completely randomly.

Pair Corralation between Monster Beverage and GBS Software

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the GBS Software. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 2.52 times less risky than GBS Software. The stock trades about -0.08 of its potential returns per unit of risk. The GBS Software AG is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  262.00  in GBS Software AG on October 10, 2024 and sell it today you would earn a total of  24.00  from holding GBS Software AG or generate 9.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Monster Beverage Corp  vs.  GBS Software AG

Monster Beverage Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 6 (%) 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 February 2025.

GBS Software AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GBS Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Monster Beverage and GBS Software

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

The idea behind Monster Beverage Corp and GBS Software 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.