Correlation Between Monster Beverage and Harmony Gold

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

Diversification Opportunities for Monster Beverage and Harmony Gold

-0.15

Correlation Coefficient

Monster Beverage  Harmony Gold

Good diversification

The 3 months correlation between Monster and Harmony is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining 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 Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of Monster Beverage i.e., Monster Beverage and Harmony Gold go up and down completely randomly.

Pair Corralation between Monster Beverage and Harmony Gold

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Harmony Gold. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 2.58 times less risky than Harmony Gold. The stock trades about -0.13 of its potential returns per unit of risk. The Harmony Gold Mining is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  795.00  in Harmony Gold Mining on October 20, 2024 and sell it today you would earn a total of  130.00  from holding Harmony Gold Mining or generate 16.35% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Harmony Gold Mining

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Gold Mining 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Monster Beverage and Harmony Gold

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

The idea behind Monster Beverage Corp and Harmony Gold Mining 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.