Correlation Between STMicroelectronics and Monster Beverage

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

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

Diversification Opportunities for STMicroelectronics and Monster Beverage

-0.22

Correlation Coefficient

STMicroelectronics  Monster Beverage

Very good diversification

The 3 months correlation between STMicroelectronics and Monster is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and STMicroelectronics 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 STMicroelectronics NV 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 has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Monster Beverage go up and down completely randomly.

Pair Corralation between STMicroelectronics and Monster Beverage

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 2.16 times more return on investment than Monster Beverage. However, STMicroelectronics is 2.16 times more volatile than Monster Beverage. It trades about 0.24 of its potential returns per unit of risk. Monster Beverage is currently generating about -0.02 per unit of risk. If you would invest  11,885  in STMicroelectronics NV on April 20, 2025 and sell it today you would earn a total of  5,647  from holding STMicroelectronics NV or generate 47.51% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Monster Beverage

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, STMicroelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monster Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with STMicroelectronics and Monster Beverage

The main advantage of trading using opposite STMicroelectronics and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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 STMicroelectronics NV and Monster Beverage 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.