Correlation Between Monster Beverage and JD SPORTS

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

Diversification Opportunities for Monster Beverage and JD SPORTS

-0.69

Correlation Coefficient

Monster Beverage  JD SPORTS

Excellent diversification

The 3 months correlation between Monster and 9JD is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and JD SPORTS FASH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD SPORTS FASH 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 JD SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD SPORTS FASH has no effect on the direction of Monster Beverage i.e., Monster Beverage and JD SPORTS go up and down completely randomly.

Pair Corralation between Monster Beverage and JD SPORTS

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.54 times more return on investment than JD SPORTS. However, Monster Beverage Corp is 1.84 times less risky than JD SPORTS. It trades about 0.06 of its potential returns per unit of risk. JD SPORTS FASH is currently generating about -0.25 per unit of risk. If you would invest  4,703  in Monster Beverage Corp on September 27, 2024 and sell it today you would earn a total of  253.00  from holding Monster Beverage Corp or generate 5.38% 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.  JD SPORTS FASH

Monster Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

JD SPORTS FASH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD SPORTS FASH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Monster Beverage and JD SPORTS

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

The idea behind Monster Beverage Corp and JD SPORTS FASH 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 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.