Correlation Between Monster Beverage and Empire Metals

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

Diversification Opportunities for Monster Beverage and Empire Metals

-0.64

Correlation Coefficient

Monster Beverage  Empire Metals

Excellent diversification

The 3 months correlation between Monster and Empire is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited 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 Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Monster Beverage i.e., Monster Beverage and Empire Metals go up and down completely randomly.

Pair Corralation between Monster Beverage and Empire Metals

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.47 times more return on investment than Empire Metals. However, Monster Beverage Corp is 2.14 times less risky than Empire Metals. It trades about 0.09 of its potential returns per unit of risk. Empire Metals Limited is currently generating about 0.03 per unit of risk. If you would invest  4,899  in Monster Beverage Corp on October 6, 2024 and sell it today you would earn a total of  344.00  from holding Monster Beverage Corp or generate 7.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Monster Beverage Corp  vs.  Empire Metals Limited

Monster Beverage Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Empire Metals Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Empire Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Monster Beverage and Empire Metals

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

The idea behind Monster Beverage Corp and Empire Metals Limited 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.