Correlation Between Monster Beverage and China Resources

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

Diversification Opportunities for Monster Beverage and China Resources

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Monster and China is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Monster Beverage i.e., Monster Beverage and China Resources go up and down completely randomly.

Pair Corralation between Monster Beverage and China Resources

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 0.54 times more return on investment than China Resources. However, Monster Beverage Corp is 1.87 times less risky than China Resources. It trades about 0.0 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.02 per unit of risk. If you would invest  5,129  in Monster Beverage Corp on October 24, 2024 and sell it today you would lose (161.00) from holding Monster Beverage Corp or give up 3.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.4%
ValuesDaily Returns

Monster Beverage Corp  vs.  China Resources Beer

 Performance 
       Timeline  
Monster Beverage Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
China Resources Beer 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage and China Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Monster Beverage and China Resources

The main advantage of trading using opposite Monster Beverage and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.
The idea behind Monster Beverage Corp and China Resources Beer 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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