Correlation Between Monster Beverage and Marchex

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

Diversification Opportunities for Monster Beverage and Marchex

0.17

Correlation Coefficient

Monster Beverage  Marchex

Average diversification

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

Pair Corralation between Monster Beverage and Marchex

Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the Marchex. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 2.43 times less risky than Marchex. The stock trades about -0.2 of its potential returns per unit of risk. The Marchex is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Marchex on March 2, 2024 and sell it today you would earn a total of  2.00  from holding Marchex or generate 1.49% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Marchex

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Marchex

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and Marchex

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

The idea behind Monster Beverage Corp and Marchex 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.