Correlation Between Monster Beverage and China Resources
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and China Resources 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 China Resources 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 China Resources Beer, you can compare the effects of market volatilities on Monster Beverage and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and China Resources.
Diversification Opportunities for Monster Beverage and China Resources
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Monster and China is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Monster Beverage i.e., Monster Beverage and China Resources go up and down completely randomly.
Pair Corralation between Monster Beverage and China Resources
Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 6.41 times less risky than China Resources. The stock trades about -0.06 of its potential returns per unit of risk. The China Resources Beer is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 261.00 in China Resources Beer on October 12, 2024 and sell it today you would earn a total of 6.00 from holding China Resources Beer or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Monster Beverage Corp vs. China Resources Beer
Performance |
| Timeline |
| Monster Beverage Corp |
| China Resources Beer |
Monster Beverage and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and China Resources
The main advantage of trading using opposite Monster Beverage and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Monster Beverage vs. Vita Coco | Monster Beverage vs. PepsiCo | Monster Beverage vs. The Coca Cola | Monster Beverage vs. Coca Cola Femsa SAB |
| China Resources vs. Tsingtao Brewery Co | China Resources vs. Budweiser Brewing | China Resources vs. Boston Beer | China Resources vs. Anheuser Busch Inbev |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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