Correlation Between Monster Beverage and Infosys

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

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

Diversification Opportunities for Monster Beverage and Infosys

0.65

Correlation Coefficient

Monster Beverage  Infosys

Poor diversification

The 3 months correlation between Monster and Infosys is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Limited has no effect on the direction of Monster Beverage i.e., Monster Beverage and Infosys go up and down completely randomly.

Pair Corralation between Monster Beverage and Infosys

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.73 times more return on investment than Infosys. However, Monster Beverage is 1.73 times more volatile than Infosys Limited. It trades about -0.03 of its potential returns per unit of risk. Infosys Limited is currently generating about -0.14 per unit of risk. If you would invest  4,198  in Monster Beverage on December 2, 2024 and sell it today you would lose (187.00) from holding Monster Beverage or give up 4.45% of portfolio value over 90 days.

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

Monster Beverage  vs.  Infosys Limited

Monster Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monster Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Infosys Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infosys Limited 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.

Pair Trading with Monster Beverage and Infosys

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

The idea behind Monster Beverage and Infosys 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.