Correlation Between Monster Beverage and TC Energy

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

Diversification Opportunities for Monster Beverage and TC Energy

0.8

Correlation Coefficient

Monster Beverage  TC Energy

Very poor diversification

The 3 months correlation between Monster and TRS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of Monster Beverage i.e., Monster Beverage and TC Energy go up and down completely randomly.

Pair Corralation between Monster Beverage and TC Energy

If you would invest  5,285  in Monster Beverage Corp on October 4, 2024 and sell it today you would lose (192.00) from holding Monster Beverage Corp or give up 3.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.3%
Values	Daily Returns

Monster Beverage Corp  vs.  TC Energy

Monster Beverage Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 8 (%) 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 February 2025.

TC Energy

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days TC Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Monster Beverage and TC Energy

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

The idea behind Monster Beverage Corp and TC Energy 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.