Correlation Between Monster Beverage and Ameriprise Financial

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

Diversification Opportunities for Monster Beverage and Ameriprise Financial

0.25

Correlation Coefficient

Monster Beverage  Ameriprise Financial

Modest diversification

The 3 months correlation between Monster and Ameriprise is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Monster Beverage i.e., Monster Beverage and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Monster Beverage and Ameriprise Financial

Given the investment horizon of 90 days Monster Beverage is expected to generate 3.93 times less return on investment than Ameriprise Financial. In addition to that, Monster Beverage is 1.21 times more volatile than Ameriprise Financial. It trades about 0.05 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about 0.23 per unit of volatility. If you would invest  41,118  in Ameriprise Financial on February 13, 2024 and sell it today you would earn a total of  2,076  from holding Ameriprise Financial or generate 5.05% 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.  Ameriprise Financial

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.

Ameriprise Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Ameriprise Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Monster Beverage and Ameriprise Financial

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

The idea behind Monster Beverage Corp and Ameriprise Financial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.