Correlation Between Monster Beverage and Cullen/Frost Bankers

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

Diversification Opportunities for Monster Beverage and Cullen/Frost Bankers

-0.67

Correlation Coefficient

Monster Beverage  Cullen/Frost Bankers

Excellent diversification

The 3 months correlation between Monster and Cullen/Frost is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen/Frost Bankers 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 Cullen/Frost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen/Frost Bankers has no effect on the direction of Monster Beverage i.e., Monster Beverage and Cullen/Frost Bankers go up and down completely randomly.

Pair Corralation between Monster Beverage and Cullen/Frost Bankers

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.97 times more return on investment than Cullen/Frost Bankers. However, Monster Beverage Corp is 1.03 times less risky than Cullen/Frost Bankers. It trades about 0.07 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about -0.13 per unit of risk. If you would invest  5,034  in Monster Beverage Corp on December 25, 2024 and sell it today you would earn a total of  323.00  from holding Monster Beverage Corp or generate 6.42% 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.  CullenFrost Bankers

Monster Beverage Corp

Risk-Adjusted Performance

Insignificant

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 April 2025.

Cullen/Frost Bankers

Risk-Adjusted Performance

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Monster Beverage and Cullen/Frost Bankers

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

The idea behind Monster Beverage Corp and CullenFrost Bankers 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.