Correlation Between Coca Cola and Monster Beverage

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Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca-Cola and Monster Beverage Cp, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Monster Beverage.

Diversification Opportunities for Coca Cola and Monster Beverage

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Coca Cola and Monster is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and Monster Beverage Cp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and Coca Cola 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 Coca-Cola 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 has no effect on the direction of Coca Cola i.e., Coca Cola and Monster Beverage go up and down completely randomly.

Pair Corralation between Coca Cola and Monster Beverage

Allowing for the 90-day total investment horizon Coca-Cola is expected to generate 0.59 times more return on investment than Monster Beverage. However, Coca-Cola is 1.68 times less risky than Monster Beverage. It trades about 0.24 of its potential returns per unit of risk. Monster Beverage Cp is currently generating about -0.09 per unit of risk. If you would invest  6,165  in Coca-Cola on May 18, 2022 and sell it today you would earn a total of  285.00  from holding Coca-Cola or generate 4.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Coca-Cola  vs.  Monster Beverage Cp

 Performance (%) 
       Timeline  
Coca-Cola 
Coca Cola Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Coca Cola Price Channel

Monster Beverage 
Monster Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Cp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Monster Price Channel

Coca Cola and Monster Beverage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Monster Beverage

The main advantage of trading using opposite Coca Cola and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 Coca-Cola and Monster Beverage Cp 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.
Check out your portfolio center. 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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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