Correlation Between Monster Beverage and GP Investments

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and GP Investments 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 GP Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Monster Beverage and GP Investments, you can compare the effects of market volatilities on Monster Beverage and GP Investments 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 GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and GP Investments.

Diversification Opportunities for Monster Beverage and GP Investments

-0.47

Correlation Coefficient

Monster Beverage  GP Investments

Very good diversification

The 3 months correlation between Monster and GPIV33 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 are associated (or correlated) with GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Monster Beverage i.e., Monster Beverage and GP Investments go up and down completely randomly.

Pair Corralation between Monster Beverage and GP Investments

Assuming the 90 days trading horizon Monster Beverage is expected to generate 0.4 times more return on investment than GP Investments. However, Monster Beverage is 2.48 times less risky than GP Investments. It trades about 0.18 of its potential returns per unit of risk. GP Investments is currently generating about -0.01 per unit of risk. If you would invest  3,402  in Monster Beverage on September 3, 2024 and sell it today you would earn a total of  679.00  from holding Monster Beverage or generate 19.96% return on investment over 90 days.

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

Monster Beverage  vs.  GP Investments

Monster Beverage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Monster Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

GP Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GP Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, GP Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and GP Investments

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

The idea behind Monster Beverage and GP Investments 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.