Correlation Between Monster Beverage and American Shipping

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

Diversification Opportunities for Monster Beverage and American Shipping

-0.26

Correlation Coefficient

Monster Beverage  American Shipping

Very good diversification

The 3 months correlation between Monster and American is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping 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 American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of Monster Beverage i.e., Monster Beverage and American Shipping go up and down completely randomly.

Pair Corralation between Monster Beverage and American Shipping

Assuming the 90 days trading horizon Monster Beverage is expected to generate 5.23 times less return on investment than American Shipping. But when comparing it to its historical volatility, Monster Beverage Corp is 1.59 times less risky than American Shipping. It trades about 0.06 of its potential returns per unit of risk. American Shipping is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  191.00  in American Shipping on December 24, 2024 and sell it today you would earn a total of  60.00  from holding American Shipping or generate 31.41% 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.  American Shipping

Monster Beverage Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 4 (%) 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.

American Shipping

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Shipping reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and American Shipping

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

The idea behind Monster Beverage Corp and American Shipping 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.