Correlation Between Monster Beverage and Vodka Brands

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

Diversification Opportunities for Monster Beverage and Vodka Brands

-0.25

Correlation Coefficient

Monster Beverage  Vodka Brands

Very good diversification

The 3 months correlation between Monster and Vodka is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Vodka Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodka Brands Corp 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 Vodka Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodka Brands Corp has no effect on the direction of Monster Beverage i.e., Monster Beverage and Vodka Brands go up and down completely randomly.

Pair Corralation between Monster Beverage and Vodka Brands

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 0.44 times more return on investment than Vodka Brands. However, Monster Beverage Corp is 2.26 times less risky than Vodka Brands. It trades about 0.13 of its potential returns per unit of risk. Vodka Brands Corp is currently generating about 0.05 per unit of risk. If you would invest  4,838  in Monster Beverage Corp on September 4, 2024 and sell it today you would earn a total of  660.00  from holding Monster Beverage Corp or generate 13.64% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Vodka Brands Corp

Monster Beverage Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vodka Brands Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Vodka Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monster Beverage and Vodka Brands

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

The idea behind Monster Beverage Corp and Vodka Brands Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.