Correlation Between Monster Beverage and ICICI Bank

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

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

Diversification Opportunities for Monster Beverage and ICICI Bank

0.77

Correlation Coefficient

Monster Beverage  ICICI Bank

Poor diversification

The 3 months correlation between Monster and ICICI is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and ICICI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Bank Limited 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 ICICI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Bank Limited has no effect on the direction of Monster Beverage i.e., Monster Beverage and ICICI Bank go up and down completely randomly.

Pair Corralation between Monster Beverage and ICICI Bank

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.2 times less return on investment than ICICI Bank. In addition to that, Monster Beverage is 1.46 times more volatile than ICICI Bank Limited. It trades about 0.09 of its total potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.15 per unit of volatility. If you would invest  17,784  in ICICI Bank Limited on October 6, 2024 and sell it today you would earn a total of  1,235  from holding ICICI Bank Limited or generate 6.94% return on investment over 90 days.

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

Monster Beverage  vs.  ICICI Bank Limited

Monster Beverage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 16 (%) 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.

ICICI Bank Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, ICICI Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and ICICI Bank

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

The idea behind Monster Beverage and ICICI Bank Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.