Correlation Between Monster Beverage and COCA COLA

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

Diversification Opportunities for Monster Beverage and COCA COLA

0.56

Correlation Coefficient

Monster Beverage  COCA COLA

Very weak diversification

The 3 months correlation between Monster and COCA is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and COCA A HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A HBC 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 COCA COLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A HBC has no effect on the direction of Monster Beverage i.e., Monster Beverage and COCA COLA go up and down completely randomly.

Pair Corralation between Monster Beverage and COCA COLA

Assuming the 90 days horizon Monster Beverage is expected to generate 3.39 times less return on investment than COCA COLA. In addition to that, Monster Beverage is 1.01 times more volatile than COCA A HBC. It trades about 0.07 of its total potential returns per unit of risk. COCA A HBC is currently generating about 0.23 per unit of volatility. If you would invest  3,260  in COCA A HBC on December 29, 2024 and sell it today you would earn a total of  820.00  from holding COCA A HBC or generate 25.15% return on investment over 90 days.

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

Monster Beverage Corp  vs.  COCA A HBC

Monster Beverage Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

COCA A HBC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COCA A HBC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, COCA COLA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and COCA COLA

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

The idea behind Monster Beverage Corp and COCA A HBC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.