Correlation Between Monster Beverage and Future Metals

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

Diversification Opportunities for Monster Beverage and Future Metals

0.51

Correlation Coefficient

Monster Beverage  Future Metals

Very weak diversification

The 3 months correlation between Monster and Future is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL 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 Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Monster Beverage i.e., Monster Beverage and Future Metals go up and down completely randomly.

Pair Corralation between Monster Beverage and Future Metals

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.54 times more return on investment than Future Metals. However, Monster Beverage Corp is 1.84 times less risky than Future Metals. It trades about 0.15 of its potential returns per unit of risk. Future Metals NL is currently generating about 0.06 per unit of risk. If you would invest  4,822  in Monster Beverage Corp on September 3, 2024 and sell it today you would earn a total of  715.00  from holding Monster Beverage Corp or generate 14.83% 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.  Future Metals NL

Monster Beverage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Future Metals NL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Future Metals NL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Future Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monster Beverage and Future Metals

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

The idea behind Monster Beverage Corp and Future Metals NL 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.