Correlation Between KB Home and Monster Beverage

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

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

Diversification Opportunities for KB Home and Monster Beverage

0.23

Correlation Coefficient

KB Home  Monster Beverage

Modest diversification

The 3 months correlation between KBH and Monster is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding KB Home 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 KB Home 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 KB Home 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 KB Home i.e., KB Home and Monster Beverage go up and down completely randomly.

Pair Corralation between KB Home and Monster Beverage

Assuming the 90 days trading horizon KB Home is expected to generate 0.03 times more return on investment than Monster Beverage. However, KB Home is 36.79 times less risky than Monster Beverage. It trades about 0.13 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  128,911  in KB Home on April 24, 2025 and sell it today you would earn a total of  489.00  from holding KB Home or generate 0.38% return on investment over 90 days.

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

KB Home  vs.  Monster Beverage Corp

KB Home

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB Home are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, KB Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Monster Beverage Corp

Risk-Adjusted Performance

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 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.

Pair Trading with KB Home and Monster Beverage

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

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.