Correlation Between Monster Beverage and Public Storage

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

Diversification Opportunities for Monster Beverage and Public Storage

0.22

Correlation Coefficient

Monster Beverage  Public Storage

Modest diversification

The 3 months correlation between Monster and Public is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of Monster Beverage i.e., Monster Beverage and Public Storage go up and down completely randomly.

Pair Corralation between Monster Beverage and Public Storage

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 1.22 times more return on investment than Public Storage. However, Monster Beverage is 1.22 times more volatile than Public Storage. It trades about 0.19 of its potential returns per unit of risk. Public Storage is currently generating about 0.1 per unit of risk. If you would invest  4,250  in Monster Beverage Corp on September 2, 2024 and sell it today you would earn a total of  985.00  from holding Monster Beverage Corp or generate 23.18% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Public Storage

Monster Beverage Corp

Risk-Adjusted Performance

14 of 100

Good

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

Public Storage

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Monster Beverage and Public Storage

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

The idea behind Monster Beverage Corp and Public Storage 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.