Correlation Between Big Lots and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both Big Lots and Monster Beverage 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 Big Lots and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Lots and Monster Beverage Corp, you can compare the effects of market volatilities on Big Lots and Monster Beverage 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 Big Lots with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Lots and Monster Beverage.

Diversification Opportunities for Big Lots and Monster Beverage

-0.14

Correlation Coefficient

Big Lots  Monster Beverage

Good diversification

The 3 months correlation between Big and Monster is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Big Lots 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 Big Lots are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Big Lots i.e., Big Lots and Monster Beverage go up and down completely randomly.

Pair Corralation between Big Lots and Monster Beverage

Considering the 90-day investment horizon Big Lots is expected to under-perform the Monster Beverage. In addition to that, Big Lots is 3.89 times more volatile than Monster Beverage Corp. It trades about -0.05 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.04 per unit of volatility. If you would invest  4,338  in Monster Beverage Corp on January 17, 2024 and sell it today you would earn a total of  1,073  from holding Monster Beverage Corp or generate 24.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Big Lots  vs.  Monster Beverage Corp

Big Lots

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 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.

Pair Trading with Big Lots and Monster Beverage

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

The idea behind Big Lots and Monster Beverage Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.