Correlation Between Monster Beverage and KROGER

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and KROGER 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 KROGER 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 KROGER 75 percent, you can compare the effects of market volatilities on Monster Beverage and KROGER 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 KROGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and KROGER.

Diversification Opportunities for Monster Beverage and KROGER

-0.57

Correlation Coefficient

Monster Beverage  KROGER

Excellent diversification

The 3 months correlation between Monster and KROGER is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and KROGER 75 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER 75 percent 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 KROGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KROGER 75 percent has no effect on the direction of Monster Beverage i.e., Monster Beverage and KROGER go up and down completely randomly.

Pair Corralation between Monster Beverage and KROGER

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 3.89 times more return on investment than KROGER. However, Monster Beverage is 3.89 times more volatile than KROGER 75 percent. It trades about 0.05 of its potential returns per unit of risk. KROGER 75 percent is currently generating about -0.07 per unit of risk. If you would invest  5,080  in Monster Beverage Corp on September 5, 2024 and sell it today you would earn a total of  339.00  from holding Monster Beverage Corp or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

Monster Beverage Corp  vs.  KROGER 75 percent

Monster Beverage Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KROGER 75 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KROGER 75 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KROGER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and KROGER

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

The idea behind Monster Beverage Corp and KROGER 75 percent 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.