Correlation Between Monster Beverage and Corporativo Fragua

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

Diversification Opportunities for Monster Beverage and Corporativo Fragua

-0.36

Correlation Coefficient

Monster Beverage  Corporativo Fragua

Very good diversification

The 3 months correlation between Monster and Corporativo is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Corporativo Fragua SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporativo Fragua SAB 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 Corporativo Fragua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporativo Fragua SAB has no effect on the direction of Monster Beverage i.e., Monster Beverage and Corporativo Fragua go up and down completely randomly.

Pair Corralation between Monster Beverage and Corporativo Fragua

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Corporativo Fragua. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 3.1 times less risky than Corporativo Fragua. The stock trades about -0.06 of its potential returns per unit of risk. The Corporativo Fragua SAB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  60,350  in Corporativo Fragua SAB on October 11, 2024 and sell it today you would lose (1,192) from holding Corporativo Fragua SAB or give up 1.98% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Corporativo Fragua SAB

Monster Beverage Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Corporativo Fragua SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporativo Fragua SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Monster Beverage and Corporativo Fragua

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

The idea behind Monster Beverage Corp and Corporativo Fragua SAB 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.