Correlation Between Monster Beverage and Molson Coors

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

Diversification Opportunities for Monster Beverage and Molson Coors

0.79

Correlation Coefficient

Monster Beverage  Molson Coors

Poor diversification

The 3 months correlation between Monster and Molson is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Monster Beverage i.e., Monster Beverage and Molson Coors go up and down completely randomly.

Pair Corralation between Monster Beverage and Molson Coors

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Molson Coors. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.38 times less risky than Molson Coors. The stock trades about -0.07 of its potential returns per unit of risk. The Molson Coors Beverage is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,162  in Molson Coors Beverage on November 29, 2024 and sell it today you would lose (1.00) from holding Molson Coors Beverage or give up 0.02% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Molson Coors Beverage

Monster Beverage Corp

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Molson Coors Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Molson Coors Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Molson Coors 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 Molson Coors

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

The idea behind Monster Beverage Corp and Molson Coors 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.