Correlation Between Monster Beverage and Thermo Fisher

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

Diversification Opportunities for Monster Beverage and Thermo Fisher

-0.61

Correlation Coefficient

Monster Beverage  Thermo Fisher

Excellent diversification

The 3 months correlation between Monster and Thermo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of Monster Beverage i.e., Monster Beverage and Thermo Fisher go up and down completely randomly.

Pair Corralation between Monster Beverage and Thermo Fisher

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 1.23 times more return on investment than Thermo Fisher. However, Monster Beverage is 1.23 times more volatile than Thermo Fisher Scientific. It trades about 0.03 of its potential returns per unit of risk. Thermo Fisher Scientific is currently generating about -0.12 per unit of risk. If you would invest  101,435  in Monster Beverage Corp on September 25, 2024 and sell it today you would earn a total of  2,765  from holding Monster Beverage Corp or generate 2.73% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Thermo Fisher Scientific

Monster Beverage Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thermo Fisher Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Monster Beverage and Thermo Fisher

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

The idea behind Monster Beverage Corp and Thermo Fisher Scientific 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.