Correlation Between Monster Beverage and ASX

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

Diversification Opportunities for Monster Beverage and ASX

0.65

Correlation Coefficient

Monster Beverage  ASX

Poor diversification

The 3 months correlation between Monster and ASX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and ASX LTD UNSPONSADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX LTD UNSPONSADR 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 ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX LTD UNSPONSADR has no effect on the direction of Monster Beverage i.e., Monster Beverage and ASX go up and down completely randomly.

Pair Corralation between Monster Beverage and ASX

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.36 times less return on investment than ASX. In addition to that, Monster Beverage is 1.35 times more volatile than ASX LTD UNSPONSADR. It trades about 0.06 of its total potential returns per unit of risk. ASX LTD UNSPONSADR is currently generating about 0.1 per unit of volatility. If you would invest  3,780  in ASX LTD UNSPONSADR on September 18, 2024 and sell it today you would earn a total of  300.00  from holding ASX LTD UNSPONSADR or generate 7.94% return on investment over 90 days.

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

Monster Beverage Corp  vs.  ASX LTD UNSPONSADR

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.

ASX LTD UNSPONSADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASX LTD UNSPONSADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ASX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monster Beverage and ASX

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

The idea behind Monster Beverage Corp and ASX LTD UNSPONSADR 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.