Correlation Between Monster Beverage and Fevertree Drinks

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

Diversification Opportunities for Monster Beverage and Fevertree Drinks

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Monster and Fevertree is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Monster Beverage and Fevertree Drinks

Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the Fevertree Drinks. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 3.82 times less risky than Fevertree Drinks. The stock trades about -0.57 of its potential returns per unit of risk. The Fevertree Drinks Plc is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,456  in Fevertree Drinks Plc on January 19, 2024 and sell it today you would lose (104.00) from holding Fevertree Drinks Plc or give up 7.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Monster Beverage Corp  vs.  Fevertree Drinks Plc

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.
Fevertree Drinks Plc 

Risk-Adjusted Performance

4 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fevertree Drinks may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Monster Beverage and Fevertree Drinks Volatility Contrast

   Predicted Return Density   

Pair Trading with Monster Beverage and Fevertree Drinks

The main advantage of trading using opposite Monster Beverage and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.
The idea behind Monster Beverage Corp and Fevertree Drinks Plc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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