Correlation Between Monster Beverage and EI Du

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

Diversification Opportunities for Monster Beverage and EI Du

0.17

Correlation Coefficient

Monster Beverage  EI Du

Average diversification

The 3 months correlation between Monster and CTA-P-A is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and EI du Pont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EI du Pont 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 EI Du. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EI du Pont has no effect on the direction of Monster Beverage i.e., Monster Beverage and EI Du go up and down completely randomly.

Pair Corralation between Monster Beverage and EI Du

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 0.81 times more return on investment than EI Du. However, Monster Beverage Corp is 1.23 times less risky than EI Du. It trades about 0.03 of its potential returns per unit of risk. EI du Pont is currently generating about 0.02 per unit of risk. If you would invest  4,990  in Monster Beverage Corp on September 29, 2024 and sell it today you would earn a total of  265.00  from holding Monster Beverage Corp or generate 5.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.6%
Values	Daily Returns

Monster Beverage Corp  vs.  EI du Pont

Monster Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 1 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

EI du Pont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EI du Pont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Monster Beverage and EI Du

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

The idea behind Monster Beverage Corp and EI du Pont 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.