Correlation Between Vodka Brands and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both Vodka Brands and Monster Beverage 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 Vodka Brands and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vodka Brands Corp and Monster Beverage Corp, you can compare the effects of market volatilities on Vodka Brands and Monster Beverage 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 Vodka Brands with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodka Brands and Monster Beverage.

Diversification Opportunities for Vodka Brands and Monster Beverage

-0.22

Correlation Coefficient

Vodka Brands  Monster Beverage

Very good diversification

The 3 months correlation between Vodka and Monster is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Vodka Brands 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 Vodka Brands Corp are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Vodka Brands i.e., Vodka Brands and Monster Beverage go up and down completely randomly.

Pair Corralation between Vodka Brands and Monster Beverage

Given the investment horizon of 90 days Vodka Brands Corp is expected to generate 2.34 times more return on investment than Monster Beverage. However, Vodka Brands is 2.34 times more volatile than Monster Beverage Corp. It trades about 0.05 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.07 per unit of risk. If you would invest  105.00  in Vodka Brands Corp on September 12, 2024 and sell it today you would earn a total of  7.00  from holding Vodka Brands Corp or generate 6.67% return on investment over 90 days.

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

Vodka Brands Corp  vs.  Monster Beverage Corp

Vodka Brands Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile forward-looking signals, Vodka Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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

Pair Trading with Vodka Brands and Monster Beverage

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

The idea behind Vodka Brands Corp and Monster Beverage Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.