Correlation Between Monster Beverage and Martin Marietta

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

Diversification Opportunities for Monster Beverage and Martin Marietta

0.86

Correlation Coefficient

Monster Beverage  Martin Marietta

Very poor diversification

The 3 months correlation between Monster and Martin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials 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 Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Monster Beverage i.e., Monster Beverage and Martin Marietta go up and down completely randomly.

Pair Corralation between Monster Beverage and Martin Marietta

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.8 times more return on investment than Martin Marietta. However, Monster Beverage Corp is 1.24 times less risky than Martin Marietta. It trades about -0.15 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.22 per unit of risk. If you would invest  109,000  in Monster Beverage Corp on September 20, 2024 and sell it today you would lose (4,370) from holding Monster Beverage Corp or give up 4.01% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Martin Marietta Materials

Monster Beverage Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

Martin Marietta Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monster Beverage and Martin Marietta

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

The idea behind Monster Beverage Corp and Martin Marietta Materials 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.