Correlation Between Monster Beverage and Alfa SAB

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

Diversification Opportunities for Monster Beverage and Alfa SAB

0.36

Correlation Coefficient

Monster Beverage  Alfa SAB

Weak diversification

The 3 months correlation between Monster and Alfa is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Alfa SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa SAB de 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 Alfa SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa SAB de has no effect on the direction of Monster Beverage i.e., Monster Beverage and Alfa SAB go up and down completely randomly.

Pair Corralation between Monster Beverage and Alfa SAB

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.74 times more return on investment than Alfa SAB. However, Monster Beverage Corp is 1.35 times less risky than Alfa SAB. It trades about 0.04 of its potential returns per unit of risk. Alfa SAB de is currently generating about 0.01 per unit of risk. If you would invest  101,800  in Monster Beverage Corp on September 26, 2024 and sell it today you would earn a total of  3,000  from holding Monster Beverage Corp or generate 2.95% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Alfa SAB de

Monster Beverage Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alfa SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Alfa SAB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and Alfa SAB

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

The idea behind Monster Beverage Corp and Alfa SAB de 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.