Correlation Between Monster Beverage and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Coca Cola 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 Coca Cola 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 Coca Cola European Partners, you can compare the effects of market volatilities on Monster Beverage and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Coca Cola.
Diversification Opportunities for Monster Beverage and Coca Cola
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Coca is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Coca Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola European 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola European has no effect on the direction of Monster Beverage i.e., Monster Beverage and Coca Cola go up and down completely randomly.
Pair Corralation between Monster Beverage and Coca Cola
Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 1.15 times more return on investment than Coca Cola. However, Monster Beverage is 1.15 times more volatile than Coca Cola European Partners. It trades about 0.15 of its potential returns per unit of risk. Coca Cola European Partners is currently generating about 0.17 per unit of risk. If you would invest 5,010 in Monster Beverage Corp on January 14, 2025 and sell it today you would earn a total of 848.00 from holding Monster Beverage Corp or generate 16.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Coca Cola European Partners
Performance |
| Timeline |
| Monster Beverage Corp |
| Coca Cola European |
Monster Beverage and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Coca Cola
The main advantage of trading using opposite Monster Beverage and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Monster Beverage vs. Vita Coco | Monster Beverage vs. PepsiCo | Monster Beverage vs. The Coca Cola | Monster Beverage vs. Coca Cola Femsa SAB |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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