Correlation Between Vita Coco and Monster Beverage

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

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

Diversification Opportunities for Vita Coco and Monster Beverage

0.3

Correlation Coefficient

Vita Coco  Monster Beverage

Weak diversification

The 3 months correlation between Vita and Monster is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco 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 Vita Coco 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 Vita Coco 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 Vita Coco i.e., Vita Coco and Monster Beverage go up and down completely randomly.

Pair Corralation between Vita Coco and Monster Beverage

Given the investment horizon of 90 days Vita Coco is expected to generate 2.17 times more return on investment than Monster Beverage. However, Vita Coco is 2.17 times more volatile than Monster Beverage Corp. It trades about 0.11 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.06 per unit of risk. If you would invest  2,497  in Vita Coco on February 3, 2024 and sell it today you would earn a total of  151.50  from holding Vita Coco or generate 6.07% return on investment over 90 days.

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

Vita Coco  vs.  Monster Beverage Corp

Vita Coco

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vita Coco and Monster Beverage

The main advantage of trading using opposite Vita Coco and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco 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 Vita Coco 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.

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 the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.