Correlation Between Monster Beverage and PT Barito

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

Diversification Opportunities for Monster Beverage and PT Barito

-0.47

Correlation Coefficient

Monster Beverage  PT Barito

Very good diversification

The 3 months correlation between Monster and OB8 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and PT Barito Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Barito Pacific 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 Barito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Barito Pacific has no effect on the direction of Monster Beverage i.e., Monster Beverage and PT Barito go up and down completely randomly.

Pair Corralation between Monster Beverage and PT Barito

Assuming the 90 days trading horizon Monster Beverage is expected to generate 11.02 times less return on investment than PT Barito. But when comparing it to its historical volatility, Monster Beverage Corp is 4.74 times less risky than PT Barito. It trades about 0.02 of its potential returns per unit of risk. PT Barito Pacific is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4.50  in PT Barito Pacific on October 7, 2024 and sell it today you would earn a total of  0.15  from holding PT Barito Pacific or generate 3.33% 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.  PT Barito Pacific

Monster Beverage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

PT Barito Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Barito Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Barito 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 PT Barito

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

The idea behind Monster Beverage Corp and PT Barito Pacific 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.