Correlation Between Monster Beverage and Farmacias Benavides

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

Diversification Opportunities for Monster Beverage and Farmacias Benavides

-0.33

Correlation Coefficient

Monster Beverage  Farmacias Benavides

Very good diversification

The 3 months correlation between Monster and Farmacias is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Farmacias Benavides SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmacias Benavides SAB 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 Farmacias Benavides. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmacias Benavides SAB has no effect on the direction of Monster Beverage i.e., Monster Beverage and Farmacias Benavides go up and down completely randomly.

Pair Corralation between Monster Beverage and Farmacias Benavides

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Farmacias Benavides. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.32 times less risky than Farmacias Benavides. The stock trades about -0.22 of its potential returns per unit of risk. The Farmacias Benavides SAB is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  1,949  in Farmacias Benavides SAB on September 27, 2024 and sell it today you would earn a total of  251.00  from holding Farmacias Benavides SAB or generate 12.88% 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.  Farmacias Benavides SAB

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.

Farmacias Benavides SAB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmacias Benavides SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Farmacias Benavides may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Monster Beverage and Farmacias Benavides

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

The idea behind Monster Beverage Corp and Farmacias Benavides SAB 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.