Correlation Between Monster Beverage and Coca Cola

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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 Cola FEMSA SAB, 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

MonsterCocaDiversified AwayMonsterCocaDiversified Away100%
0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Monster and Coca is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA 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 Cola FEMSA 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 Corp is expected to under-perform the Coca Cola. In addition to that, Monster Beverage is 1.06 times more volatile than Coca Cola FEMSA SAB. It trades about -0.05 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.14 per unit of volatility. If you would invest  7,234  in Coca Cola FEMSA SAB on November 19, 2024 and sell it today you would earn a total of  816.00  from holding Coca Cola FEMSA SAB or generate 11.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Monster Beverage Corp  vs.  Coca Cola FEMSA SAB

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15MOB CFSL
       Timeline  
Monster Beverage Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb454647484950515253
Coca Cola FEMSA 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb7274767880

Monster Beverage and Coca Cola Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.05-4.53-3.01-1.490.02531.523.044.556.07 0.050.100.150.20
JavaScript chart by amCharts 3.21.15MOB CFSL
       Returns  

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 Cola FEMSA SAB 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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