Correlation Between China Resources and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Resources Beer and Monster Beverage Corp, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Monster Beverage.

Diversification Opportunities for China Resources and Monster Beverage

-0.09

Correlation Coefficient

China Resources  Monster Beverage

Good diversification

The 3 months correlation between China and Monster is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer 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 China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Monster Beverage go up and down completely randomly.

Pair Corralation between China Resources and Monster Beverage

Assuming the 90 days horizon China Resources Beer is expected to generate 1.66 times more return on investment than Monster Beverage. However, China Resources is 1.66 times more volatile than Monster Beverage Corp. It trades about 0.13 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.05 per unit of risk. If you would invest  261.00  in China Resources Beer on October 9, 2024 and sell it today you would earn a total of  49.00  from holding China Resources Beer or generate 18.77% return on investment over 90 days.

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

China Resources Beer  vs.  Monster Beverage Corp

China Resources Beer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with China Resources and Monster Beverage

The main advantage of trading using opposite China Resources and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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 China Resources Beer 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.