Correlation Between Monster Beverage and EBRO FOODS

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

Diversification Opportunities for Monster Beverage and EBRO FOODS

0.21

Correlation Coefficient

Monster Beverage  EBRO FOODS

Modest diversification

The 3 months correlation between Monster and EBRO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and EBRO FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBRO FOODS 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 EBRO FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBRO FOODS has no effect on the direction of Monster Beverage i.e., Monster Beverage and EBRO FOODS go up and down completely randomly.

Pair Corralation between Monster Beverage and EBRO FOODS

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the EBRO FOODS. In addition to that, Monster Beverage is 1.56 times more volatile than EBRO FOODS. It trades about -0.04 of its total potential returns per unit of risk. EBRO FOODS is currently generating about 0.08 per unit of volatility. If you would invest  1,572  in EBRO FOODS on September 19, 2024 and sell it today you would earn a total of  20.00  from holding EBRO FOODS or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Monster Beverage Corp  vs.  EBRO FOODS

Monster Beverage Corp

Risk-Adjusted Performance

5 of 100

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. In spite of comparatively fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EBRO FOODS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EBRO FOODS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EBRO FOODS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Monster Beverage and EBRO FOODS

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

The idea behind Monster Beverage Corp and EBRO FOODS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.