Correlation Between Monster Beverage and Liberty Media

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Liberty Media 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 Liberty Media 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 Liberty Media Corp, you can compare the effects of market volatilities on Monster Beverage and Liberty Media 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 Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Liberty Media.

Diversification Opportunities for Monster Beverage and Liberty Media

0.81

Correlation Coefficient

Monster Beverage  Liberty Media

Very poor diversification

The 3 months correlation between Monster and Liberty is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Liberty Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media Corp 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media Corp has no effect on the direction of Monster Beverage i.e., Monster Beverage and Liberty Media go up and down completely randomly.

Pair Corralation between Monster Beverage and Liberty Media

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.09 times less return on investment than Liberty Media. In addition to that, Monster Beverage is 1.06 times more volatile than Liberty Media Corp. It trades about 0.15 of its total potential returns per unit of risk. Liberty Media Corp is currently generating about 0.17 per unit of volatility. If you would invest  6,998  in Liberty Media Corp on September 3, 2024 and sell it today you would earn a total of  1,148  from holding Liberty Media Corp or generate 16.4% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Liberty Media Corp

Monster Beverage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Liberty Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Liberty Media

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

The idea behind Monster Beverage Corp and Liberty Media 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.