Correlation Between Monster Beverage and Capri Holdings

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

By analyzing existing cross correlation between Monster Beverage and Capri Holdings Limited, you can compare the effects of market volatilities on Monster Beverage and Capri Holdings 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 Capri Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Capri Holdings.

Diversification Opportunities for Monster Beverage and Capri Holdings

0.27

Correlation Coefficient

Monster Beverage  Capri Holdings

Modest diversification

The 3 months correlation between Monster and Capri is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Capri Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 are associated (or correlated) with Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Monster Beverage i.e., Monster Beverage and Capri Holdings go up and down completely randomly.

Pair Corralation between Monster Beverage and Capri Holdings

Assuming the 90 days trading horizon Monster Beverage is expected to under-perform the Capri Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage is 1.61 times less risky than Capri Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Capri Holdings Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  8,554  in Capri Holdings Limited on April 24, 2025 and sell it today you would earn a total of  2,050  from holding Capri Holdings Limited or generate 23.97% return on investment over 90 days.

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

Monster Beverage  vs.  Capri Holdings Limited

Monster Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monster Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat 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.

Capri Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capri Holdings Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capri Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Capri Holdings

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

The idea behind Monster Beverage and Capri Holdings Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.