Correlation Between Kellanova and Monster Beverage

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

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

Diversification Opportunities for Kellanova and Monster Beverage

0.35

Correlation Coefficient

Kellanova  Monster Beverage

Weak diversification

The 3 months correlation between Kellanova and Monster is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kellanova and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and Kellanova 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 Kellanova 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 has no effect on the direction of Kellanova i.e., Kellanova and Monster Beverage go up and down completely randomly.

Pair Corralation between Kellanova and Monster Beverage

Assuming the 90 days trading horizon Kellanova is expected to under-perform the Monster Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Kellanova is 3.34 times less risky than Monster Beverage. The stock trades about -0.17 of its potential returns per unit of risk. The Monster Beverage is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,056  in Monster Beverage on December 26, 2024 and sell it today you would earn a total of  41.00  from holding Monster Beverage or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Kellanova  vs.  Monster Beverage

Kellanova

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kellanova has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Monster Beverage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kellanova and Monster Beverage

The main advantage of trading using opposite Kellanova and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellanova 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 Kellanova and Monster Beverage 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.