Correlation Between Coca Cola and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola FEMSA SAB and Monster Beverage Corp, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Monster Beverage.
Diversification Opportunities for Coca Cola and Monster Beverage
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Coca and Monster is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola FEMSA SAB 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 Coca Cola 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 Coca Cola FEMSA SAB 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 Coca Cola i.e., Coca Cola and Monster Beverage go up and down completely randomly.
Pair Corralation between Coca Cola and Monster Beverage
Assuming the 90 days trading horizon Coca Cola FEMSA SAB is expected to generate 1.01 times more return on investment than Monster Beverage. However, Coca Cola is 1.01 times more volatile than Monster Beverage Corp. It trades about 0.04 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.17 per unit of risk. If you would invest 7,429 in Coca Cola FEMSA SAB on September 28, 2024 and sell it today you would earn a total of 71.00 from holding Coca Cola FEMSA SAB or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coca Cola FEMSA SAB vs. Monster Beverage Corp
Performance |
| Timeline |
| Coca Cola FEMSA |
| Monster Beverage Corp |
Coca Cola and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Monster Beverage
The main advantage of trading using opposite Coca Cola and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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.| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Keurig Dr Pepper | Coca Cola vs. Coca Cola European Partners | Coca Cola vs. National Beverage Corp |
| Monster Beverage vs. Keurig Dr Pepper | Monster Beverage vs. Coca Cola European Partners | Monster Beverage vs. Coca Cola FEMSA SAB | Monster Beverage vs. National Beverage Corp |
Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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