Correlation Between Monster Beverage and Ambari Brands

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

Diversification Opportunities for Monster Beverage and Ambari Brands

0.2

Correlation Coefficient

Monster Beverage  Ambari Brands

Modest diversification

The 3 months correlation between Monster and Ambari is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Ambari Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambari Brands 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 Ambari Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambari Brands has no effect on the direction of Monster Beverage i.e., Monster Beverage and Ambari Brands go up and down completely randomly.

Pair Corralation between Monster Beverage and Ambari Brands

Given the investment horizon of 90 days Monster Beverage is expected to generate 2.66 times less return on investment than Ambari Brands. But when comparing it to its historical volatility, Monster Beverage Corp is 11.89 times less risky than Ambari Brands. It trades about 0.07 of its potential returns per unit of risk. Ambari Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9.15  in Ambari Brands on October 8, 2024 and sell it today you would lose (1.65) from holding Ambari Brands or give up 18.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.19%
Values	Daily Returns

Monster Beverage Corp  vs.  Ambari Brands

Monster Beverage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ambari Brands

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ambari Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady fundamental drivers, Ambari Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Ambari Brands

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

The idea behind Monster Beverage Corp and Ambari Brands 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.