Correlation Between PepsiCo and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both PepsiCo 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 PepsiCo and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Monster Beverage Corp, you can compare the effects of market volatilities on PepsiCo 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 PepsiCo with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Monster Beverage.
Diversification Opportunities for PepsiCo and Monster Beverage
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between PepsiCo and Monster is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo 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 PepsiCo 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 PepsiCo 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 PepsiCo i.e., PepsiCo and Monster Beverage go up and down completely randomly.
Pair Corralation between PepsiCo and Monster Beverage
Considering the 90-day investment horizon PepsiCo is expected to generate 1.21 times less return on investment than Monster Beverage. But when comparing it to its historical volatility, PepsiCo is 1.29 times less risky than Monster Beverage. It trades about 0.06 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,030 in Monster Beverage Corp on January 19, 2024 and sell it today you would earn a total of 395.00 from holding Monster Beverage Corp or generate 7.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. Monster Beverage Corp
Performance |
| Timeline |
| PepsiCo |
| Monster Beverage Corp |
PepsiCo and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Monster Beverage
The main advantage of trading using opposite PepsiCo and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo 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.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| Monster Beverage vs. Keurig Dr Pepper | Monster Beverage vs. Embotelladora Andina SA | Monster Beverage vs. Embotelladora Andina SA | Monster Beverage vs. Signet International Holdings |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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