Correlation Between Monster Beverage and CHINA EDUCATION

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

Diversification Opportunities for Monster Beverage and CHINA EDUCATION

-0.16

Correlation Coefficient

Monster Beverage  CHINA EDUCATION

Good diversification

The 3 months correlation between Monster and CHINA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP 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 CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of Monster Beverage i.e., Monster Beverage and CHINA EDUCATION go up and down completely randomly.

Pair Corralation between Monster Beverage and CHINA EDUCATION

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the CHINA EDUCATION. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 3.39 times less risky than CHINA EDUCATION. The stock trades about -0.02 of its potential returns per unit of risk. The CHINA EDUCATION GROUP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  25.00  in CHINA EDUCATION GROUP on April 24, 2025 and sell it today you would earn a total of  7.00  from holding CHINA EDUCATION GROUP or generate 28.0% return on investment over 90 days.

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

Monster Beverage Corp  vs.  CHINA EDUCATION GROUP

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 comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CHINA EDUCATION GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA EDUCATION GROUP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA EDUCATION reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and CHINA EDUCATION

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

The idea behind Monster Beverage Corp and CHINA EDUCATION GROUP 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.