Correlation Between Monster Beverage and Lifeway Foods

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

Diversification Opportunities for Monster Beverage and Lifeway Foods

-0.4

Correlation Coefficient

Monster Beverage  Lifeway Foods

Very good diversification

The 3 months correlation between Monster and Lifeway is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway 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 Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Monster Beverage i.e., Monster Beverage and Lifeway Foods go up and down completely randomly.

Pair Corralation between Monster Beverage and Lifeway Foods

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.43 times more return on investment than Lifeway Foods. However, Monster Beverage Corp is 2.33 times less risky than Lifeway Foods. It trades about 0.08 of its potential returns per unit of risk. Lifeway Foods is currently generating about 0.0 per unit of risk. If you would invest  4,630  in Monster Beverage Corp on October 10, 2024 and sell it today you would earn a total of  336.00  from holding Monster Beverage Corp or generate 7.26% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Lifeway Foods

Monster Beverage Corp

Risk-Adjusted Performance

6 of 100

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 fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lifeway Foods

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Lifeway Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lifeway Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Monster Beverage and Lifeway Foods

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

The idea behind Monster Beverage Corp and Lifeway 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.