Correlation Between Monster Beverage and Talanx AG

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

Diversification Opportunities for Monster Beverage and Talanx AG

0.4

Correlation Coefficient

Monster Beverage  Talanx AG

Very weak diversification

The 3 months correlation between Monster and Talanx is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of Monster Beverage i.e., Monster Beverage and Talanx AG go up and down completely randomly.

Pair Corralation between Monster Beverage and Talanx AG

Assuming the 90 days trading horizon Monster Beverage is expected to generate 10.08 times less return on investment than Talanx AG. In addition to that, Monster Beverage is 1.23 times more volatile than Talanx AG. It trades about 0.02 of its total potential returns per unit of risk. Talanx AG is currently generating about 0.26 per unit of volatility. If you would invest  7,305  in Talanx AG on October 7, 2024 and sell it today you would earn a total of  990.00  from holding Talanx AG or generate 13.55% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Talanx AG

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.

Talanx AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Talanx AG

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

The idea behind Monster Beverage Corp and Talanx 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..