Correlation Between COCA A and Monster Beverage

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Can any of the company-specific risk be diversified away by investing in both COCA A 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 COCA A and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COCA A HBC and Monster Beverage Corp, you can compare the effects of market volatilities on COCA A 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 COCA A with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of COCA A and Monster Beverage.

Diversification Opportunities for COCA A and Monster Beverage

COCAMonsterDiversified AwayCOCAMonsterDiversified Away100%
-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between COCA and Monster is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding COCA A HBC and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and COCA A 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 COCA A HBC 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 Corp has no effect on the direction of COCA A i.e., COCA A and Monster Beverage go up and down completely randomly.

Pair Corralation between COCA A and Monster Beverage

Assuming the 90 days trading horizon COCA A HBC is expected to generate 0.97 times more return on investment than Monster Beverage. However, COCA A HBC is 1.03 times less risky than Monster Beverage. It trades about 0.07 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.01 per unit of risk. If you would invest  2,256  in COCA A HBC on November 19, 2024 and sell it today you would earn a total of  1,544  from holding COCA A HBC or generate 68.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

COCA A HBC  vs.  Monster Beverage Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15CCKC MOB
       Timeline  
COCA A HBC 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in COCA A HBC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, COCA A reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb32333435363738
Monster Beverage Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb454647484950515253

COCA A and Monster Beverage Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.16-3.86-2.57-1.270.02291.372.754.125.5 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15CCKC MOB
       Returns  

Pair Trading with COCA A and Monster Beverage

The main advantage of trading using opposite COCA A and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COCA A 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 COCA A HBC and Monster Beverage Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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