Correlation Between Summit Materials and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both Summit Materials and Monster Beverage 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 Summit Materials and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Materials Cl and Monster Beverage Corp, you can compare the effects of market volatilities on Summit Materials and Monster Beverage 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 Summit Materials with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Monster Beverage.

Diversification Opportunities for Summit Materials and Monster Beverage

0.76

Correlation Coefficient

Summit Materials  Monster Beverage

Poor diversification

The 3 months correlation between Summit and Monster is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Summit Materials 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 Summit Materials Cl are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Summit Materials i.e., Summit Materials and Monster Beverage go up and down completely randomly.

Pair Corralation between Summit Materials and Monster Beverage

Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 1.63 times more return on investment than Monster Beverage. However, Summit Materials is 1.63 times more volatile than Monster Beverage Corp. It trades about 0.16 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.17 per unit of risk. If you would invest  3,999  in Summit Materials Cl on August 31, 2024 and sell it today you would earn a total of  1,093  from holding Summit Materials Cl or generate 27.33% return on investment over 90 days.

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

Summit Materials Cl  vs.  Monster Beverage Corp

Summit Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 13 (%) 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.

Pair Trading with Summit Materials and Monster Beverage

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

The idea behind Summit Materials Cl and Monster Beverage 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.