Correlation Between Monster Beverage and Este Lauder

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

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

Diversification Opportunities for Monster Beverage and Este Lauder

-0.57

Correlation Coefficient

Monster Beverage  Este Lauder

Excellent diversification

The 3 months correlation between Monster and Este is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder 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 are associated (or correlated) with Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of Monster Beverage i.e., Monster Beverage and Este Lauder go up and down completely randomly.

Pair Corralation between Monster Beverage and Este Lauder

Assuming the 90 days trading horizon Monster Beverage is expected to generate 0.34 times more return on investment than Este Lauder. However, Monster Beverage is 2.91 times less risky than Este Lauder. It trades about 0.08 of its potential returns per unit of risk. The Este Lauder is currently generating about 0.01 per unit of risk. If you would invest  3,800  in Monster Beverage on September 17, 2024 and sell it today you would earn a total of  172.00  from holding Monster Beverage or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Monster Beverage  vs.  The Este Lauder

Monster Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Monster Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Este Lauder

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Este Lauder are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Este Lauder may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monster Beverage and Este Lauder

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

The idea behind Monster Beverage and The Este Lauder 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.