Correlation Between Monster Beverage and Information Services

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

Diversification Opportunities for Monster Beverage and Information Services

-0.1

Correlation Coefficient

Monster Beverage  Information Services

Good diversification

The 3 months correlation between Monster and Information is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Information Services Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Monster Beverage i.e., Monster Beverage and Information Services go up and down completely randomly.

Pair Corralation between Monster Beverage and Information Services

Assuming the 90 days trading horizon Monster Beverage is expected to generate 15.69 times less return on investment than Information Services. But when comparing it to its historical volatility, Monster Beverage Corp is 1.19 times less risky than Information Services. It trades about 0.02 of its potential returns per unit of risk. Information Services International Dentsu is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,960  in Information Services International Dentsu on October 7, 2024 and sell it today you would earn a total of  640.00  from holding Information Services International Dentsu or generate 21.62% 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.  Information Services Internati

Monster Beverage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Information Services

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Monster Beverage and Information Services

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

The idea behind Monster Beverage Corp and Information Services International Dentsu 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.