Correlation Between Monster Beverage and Third Point

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

Diversification Opportunities for Monster Beverage and Third Point

0.41

Correlation Coefficient

Monster Beverage  Third Point

Very weak diversification

The 3 months correlation between Monster and Third is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Third Point Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Point Investors 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 Third Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Point Investors has no effect on the direction of Monster Beverage i.e., Monster Beverage and Third Point go up and down completely randomly.

Pair Corralation between Monster Beverage and Third Point

Assuming the 90 days trading horizon Monster Beverage is expected to generate 3.18 times less return on investment than Third Point. In addition to that, Monster Beverage is 1.06 times more volatile than Third Point Investors. It trades about 0.02 of its total potential returns per unit of risk. Third Point Investors is currently generating about 0.06 per unit of volatility. If you would invest  179,250  in Third Point Investors on April 23, 2025 and sell it today you would earn a total of  6,750  from holding Third Point Investors or generate 3.77% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Third Point Investors

Monster Beverage Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 1 (%) 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.

Third Point Investors

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Third Point Investors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Third Point is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Monster Beverage and Third Point

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

The idea behind Monster Beverage Corp and Third Point Investors 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.