Correlation Between Monster Beverage and Ambev SA

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

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

Diversification Opportunities for Monster Beverage and Ambev SA

0.08

Correlation Coefficient

Monster Beverage  Ambev SA

Significant diversification

The 3 months correlation between Monster and Ambev is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA 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 Corp are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Monster Beverage i.e., Monster Beverage and Ambev SA go up and down completely randomly.

Pair Corralation between Monster Beverage and Ambev SA

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.58 times more return on investment than Ambev SA. However, Monster Beverage Corp is 1.74 times less risky than Ambev SA. It trades about 0.09 of its potential returns per unit of risk. Ambev SA is currently generating about 0.02 per unit of risk. If you would invest  90,100  in Monster Beverage Corp on October 7, 2024 and sell it today you would earn a total of  18,989  from holding Monster Beverage Corp or generate 21.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Monster Beverage Corp  vs.  Ambev SA

Monster Beverage Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Monster Beverage showed solid returns over the last few months and may actually be approaching a breakup point.

Ambev SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Monster Beverage and Ambev SA

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

The idea behind Monster Beverage Corp and Ambev SA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.