Correlation Between Monster Beverage and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and PepsiCo 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 PepsiCo 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 PepsiCo, you can compare the effects of market volatilities on Monster Beverage and PepsiCo 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 PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and PepsiCo.
Diversification Opportunities for Monster Beverage and PepsiCo
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monster and PepsiCo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo 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 PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of Monster Beverage i.e., Monster Beverage and PepsiCo go up and down completely randomly.
Pair Corralation between Monster Beverage and PepsiCo
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 1.01 times more return on investment than PepsiCo. However, Monster Beverage is 1.01 times more volatile than PepsiCo. It trades about 0.02 of its potential returns per unit of risk. PepsiCo is currently generating about 0.0 per unit of risk. If you would invest 99,850 in Monster Beverage Corp on September 3, 2024 and sell it today you would earn a total of 13,650 from holding Monster Beverage Corp or generate 13.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Monster Beverage Corp vs. PepsiCo
Performance |
| Timeline |
| Monster Beverage Corp |
| PepsiCo |
Monster Beverage and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and PepsiCo
The main advantage of trading using opposite Monster Beverage and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, PepsiCo 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 PepsiCo will offset losses from the drop in PepsiCo's long position.| Monster Beverage vs. The Select Sector | Monster Beverage vs. Promotora y Operadora | Monster Beverage vs. SPDR Series Trust | Monster Beverage vs. Vanguard World |
| PepsiCo vs. Verizon Communications | PepsiCo vs. McEwen Mining | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Delta Air Lines |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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