Correlation Between Monster Beverage and Liberty International

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

Diversification Opportunities for Monster Beverage and Liberty International

-0.52

Correlation Coefficient

Monster Beverage  Liberty International

Excellent diversification

The 3 months correlation between Monster and Liberty is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Liberty International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty International has no effect on the direction of Monster Beverage i.e., Monster Beverage and Liberty International go up and down completely randomly.

Pair Corralation between Monster Beverage and Liberty International

Given the investment horizon of 90 days Monster Beverage is expected to generate 63.32 times less return on investment than Liberty International. But when comparing it to its historical volatility, Monster Beverage Corp is 30.85 times less risky than Liberty International. It trades about 0.07 of its potential returns per unit of risk. Liberty International Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Liberty International Holding on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Liberty International Holding or generate 0.0% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Liberty International Holding

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Liberty International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty International Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Liberty International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Liberty International

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

The idea behind Monster Beverage Corp and Liberty International Holding 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.