Correlation Between Monster Beverage and SPARTAN STORES

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

Diversification Opportunities for Monster Beverage and SPARTAN STORES

-0.41

Correlation Coefficient

Monster Beverage  SPARTAN STORES

Very good diversification

The 3 months correlation between Monster and SPARTAN is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of Monster Beverage i.e., Monster Beverage and SPARTAN STORES go up and down completely randomly.

Pair Corralation between Monster Beverage and SPARTAN STORES

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.63 times more return on investment than SPARTAN STORES. However, Monster Beverage Corp is 1.6 times less risky than SPARTAN STORES. It trades about -0.14 of its potential returns per unit of risk. SPARTAN STORES is currently generating about -0.32 per unit of risk. If you would invest  4,972  in Monster Beverage Corp on October 17, 2024 and sell it today you would lose (133.00) from holding Monster Beverage Corp or give up 2.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Monster Beverage Corp  vs.  SPARTAN STORES

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Monster Beverage and SPARTAN STORES

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

The idea behind Monster Beverage Corp and SPARTAN STORES 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.