Correlation Between Monster Beverage and PT Indofood

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

Diversification Opportunities for Monster Beverage and PT Indofood

-0.64

Correlation Coefficient

Monster Beverage  PT Indofood

Excellent diversification

The 3 months correlation between Monster and ISM is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses 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 PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Monster Beverage i.e., Monster Beverage and PT Indofood go up and down completely randomly.

Pair Corralation between Monster Beverage and PT Indofood

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.35 times more return on investment than PT Indofood. However, Monster Beverage Corp is 2.88 times less risky than PT Indofood. It trades about 0.09 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.03 per unit of risk. If you would invest  5,009  in Monster Beverage Corp on December 29, 2024 and sell it today you would earn a total of  410.00  from holding Monster Beverage Corp or generate 8.19% 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.  PT Indofood Sukses

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 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PT Indofood Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indofood Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Monster Beverage and PT Indofood

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

The idea behind Monster Beverage Corp and PT Indofood Sukses 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.