Correlation Between Monster Beverage and Grupo Simec

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

Diversification Opportunities for Monster Beverage and Grupo Simec

0.08

Correlation Coefficient

Monster Beverage  Grupo Simec

Significant diversification

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

Pair Corralation between Monster Beverage and Grupo Simec

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Grupo Simec. In addition to that, Monster Beverage is 9.78 times more volatile than Grupo Simec SAB. It trades about -0.06 of its total potential returns per unit of risk. Grupo Simec SAB is currently generating about -0.14 per unit of volatility. If you would invest  18,500  in Grupo Simec SAB on October 10, 2024 and sell it today you would lose (54.00) from holding Grupo Simec SAB or give up 0.29% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  Grupo Simec SAB

Monster Beverage Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 6 (%) 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.

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Grupo Simec 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 Grupo Simec

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

The idea behind Monster Beverage Corp and Grupo Simec 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.