Correlation Between Monster Beverage and Codexis

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

Diversification Opportunities for Monster Beverage and Codexis

-0.32

Correlation Coefficient

Monster Beverage  Codexis

Very good diversification

The 3 months correlation between Monster and Codexis is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of Monster Beverage i.e., Monster Beverage and Codexis go up and down completely randomly.

Pair Corralation between Monster Beverage and Codexis

Given the investment horizon of 90 days Monster Beverage is expected to generate 26.48 times less return on investment than Codexis. But when comparing it to its historical volatility, Monster Beverage Corp is 3.99 times less risky than Codexis. It trades about 0.0 of its potential returns per unit of risk. Codexis is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  670.00  in Codexis on October 24, 2024 and sell it today you would lose (171.00) from holding Codexis or give up 25.52% 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.  Codexis

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Codexis

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Codexis

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

The idea behind Monster Beverage Corp and Codexis 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.