Correlation Between Monster Beverage and Kraft Heinz

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Kraft Heinz 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 Kraft Heinz 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 Kraft Heinz, you can compare the effects of market volatilities on Monster Beverage and Kraft Heinz 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 Kraft Heinz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Kraft Heinz.

Diversification Opportunities for Monster Beverage and Kraft Heinz

-0.14

Correlation Coefficient

Monster Beverage  Kraft Heinz

Good diversification

The 3 months correlation between Monster and Kraft is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and The Kraft Heinz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Heinz 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 Kraft Heinz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Heinz has no effect on the direction of Monster Beverage i.e., Monster Beverage and Kraft Heinz go up and down completely randomly.

Pair Corralation between Monster Beverage and Kraft Heinz

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.29 times more return on investment than Kraft Heinz. However, Monster Beverage is 1.29 times more volatile than The Kraft Heinz. It trades about 0.02 of its potential returns per unit of risk. The Kraft Heinz is currently generating about -0.01 per unit of risk. If you would invest  4,046  in Monster Beverage on September 28, 2024 and sell it today you would earn a total of  10.00  from holding Monster Beverage or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Monster Beverage  vs.  The Kraft Heinz

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.

Kraft Heinz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Kraft Heinz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Kraft Heinz is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and Kraft Heinz

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

The idea behind Monster Beverage and The Kraft Heinz 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.