Correlation Between Monster Beverage and Anglo American

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

Diversification Opportunities for Monster Beverage and Anglo American

0.09

Correlation Coefficient

Monster Beverage  Anglo American

Significant diversification

The 3 months correlation between Monster and Anglo is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Anglo American plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American plc 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American plc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Anglo American go up and down completely randomly.

Pair Corralation between Monster Beverage and Anglo American

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.57 times more return on investment than Anglo American. However, Monster Beverage Corp is 1.74 times less risky than Anglo American. It trades about 0.02 of its potential returns per unit of risk. Anglo American plc is currently generating about -0.24 per unit of risk. If you would invest  4,971  in Monster Beverage Corp on October 12, 2024 and sell it today you would earn a total of  12.00  from holding Monster Beverage Corp or generate 0.24% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Anglo American plc

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

Anglo American plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Anglo American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Monster Beverage and Anglo American

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

The idea behind Monster Beverage Corp and Anglo American plc 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 Global Correlations module to find global opportunities by holding instruments from different markets.