Correlation Between Monster Beverage and Vulcan Materials

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

Diversification Opportunities for Monster Beverage and Vulcan Materials

-0.76

Correlation Coefficient

Monster Beverage  Vulcan Materials

Pay attention - limited upside

The 3 months correlation between Monster and Vulcan is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Monster Beverage i.e., Monster Beverage and Vulcan Materials go up and down completely randomly.

Pair Corralation between Monster Beverage and Vulcan Materials

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 0.94 times more return on investment than Vulcan Materials. However, Monster Beverage Corp is 1.06 times less risky than Vulcan Materials. It trades about 0.13 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.09 per unit of risk. If you would invest  5,090  in Monster Beverage Corp on December 19, 2024 and sell it today you would earn a total of  590.00  from holding Monster Beverage Corp or generate 11.59% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Vulcan Materials

Monster Beverage Corp

Risk-Adjusted Performance

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Monster Beverage and Vulcan Materials

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

The idea behind Monster Beverage Corp and Vulcan Materials 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.