Correlation Between Monster Beverage and Europa Metals

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

Diversification Opportunities for Monster Beverage and Europa Metals

-0.15

Correlation Coefficient

Monster Beverage  Europa Metals

Good diversification

The 3 months correlation between Monster and Europa is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals 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 Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Monster Beverage i.e., Monster Beverage and Europa Metals go up and down completely randomly.

Pair Corralation between Monster Beverage and Europa Metals

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.26 times more return on investment than Europa Metals. However, Monster Beverage Corp is 3.83 times less risky than Europa Metals. It trades about 0.0 of its potential returns per unit of risk. Europa Metals is currently generating about -0.09 per unit of risk. If you would invest  5,540  in Monster Beverage Corp on December 1, 2024 and sell it today you would lose (46.00) from holding Monster Beverage Corp or give up 0.83% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Europa Metals

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

Europa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Monster Beverage and Europa Metals

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

The idea behind Monster Beverage Corp and Europa Metals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.