Correlation Between Monster Beverage and INTERSHOP Communications

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

Diversification Opportunities for Monster Beverage and INTERSHOP Communications

0.22

Correlation Coefficient

Monster Beverage  INTERSHOP Communications

Modest diversification

The 3 months correlation between Monster and INTERSHOP is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of Monster Beverage i.e., Monster Beverage and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between Monster Beverage and INTERSHOP Communications

Assuming the 90 days trading horizon Monster Beverage is expected to generate 2.07 times less return on investment than INTERSHOP Communications. But when comparing it to its historical volatility, Monster Beverage Corp is 2.21 times less risky than INTERSHOP Communications. It trades about 0.07 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  175.00  in INTERSHOP Communications Aktiengesellschaft on December 26, 2024 and sell it today you would earn a total of  20.00  from holding INTERSHOP Communications Aktiengesellschaft or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Monster Beverage Corp  vs.  INTERSHOP Communications Aktie

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 uncertain basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

INTERSHOP Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, INTERSHOP Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and INTERSHOP Communications

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

The idea behind Monster Beverage Corp and INTERSHOP Communications Aktiengesellschaft 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.