Correlation Between Monster Beverage and SAP SE

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

Diversification Opportunities for Monster Beverage and SAP SE

-0.32

Correlation Coefficient

Monster Beverage  SAP SE

Very good diversification

The 3 months correlation between Monster and SAP is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Monster Beverage i.e., Monster Beverage and SAP SE go up and down completely randomly.

Pair Corralation between Monster Beverage and SAP SE

Assuming the 90 days trading horizon Monster Beverage is expected to generate 7.25 times less return on investment than SAP SE. But when comparing it to its historical volatility, Monster Beverage Corp is 1.09 times less risky than SAP SE. It trades about 0.02 of its potential returns per unit of risk. SAP SE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,465  in SAP SE on December 4, 2024 and sell it today you would earn a total of  16,135  from holding SAP SE or generate 154.18% 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.  SAP SE

Monster Beverage Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 2 (%) 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.

SAP SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SAP SE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Monster Beverage and SAP SE

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

The idea behind Monster Beverage Corp and SAP SE 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.