Correlation Between Monster Beverage and Caledonia Mining

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

Diversification Opportunities for Monster Beverage and Caledonia Mining

-0.25

Correlation Coefficient

Monster Beverage  Caledonia Mining

Very good diversification

The 3 months correlation between Monster and Caledonia is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Monster Beverage i.e., Monster Beverage and Caledonia Mining go up and down completely randomly.

Pair Corralation between Monster Beverage and Caledonia Mining

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.61 times more return on investment than Caledonia Mining. However, Monster Beverage Corp is 1.65 times less risky than Caledonia Mining. It trades about 0.04 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.1 per unit of risk. If you would invest  5,072  in Monster Beverage Corp on September 13, 2024 and sell it today you would earn a total of  179.00  from holding Monster Beverage Corp or generate 3.53% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Caledonia Mining

Monster Beverage Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Caledonia Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caledonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Monster Beverage and Caledonia Mining

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

The idea behind Monster Beverage Corp and Caledonia Mining 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.