Correlation Between Coca Cola and Monster Beverage

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

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

Diversification Opportunities for Coca Cola and Monster Beverage

0.71

Correlation Coefficient

Coca Cola  Monster Beverage

Poor diversification

The 3 months correlation between Coca and Monster is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Femsa SAB 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 Coca Cola 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 Coca Cola Femsa SAB 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 Coca Cola i.e., Coca Cola and Monster Beverage go up and down completely randomly.

Pair Corralation between Coca Cola and Monster Beverage

Considering the 90-day investment horizon Coca Cola Femsa SAB is expected to under-perform the Monster Beverage. In addition to that, Coca Cola is 1.36 times more volatile than Monster Beverage Corp. It trades about -0.09 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.04 per unit of volatility. If you would invest  6,091  in Monster Beverage Corp on May 5, 2025 and sell it today you would lose (189.00) from holding Monster Beverage Corp or give up 3.1% of portfolio value over 90 days.

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

Coca Cola Femsa SAB  vs.  Monster Beverage Corp

Coca Cola Femsa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coca Cola Femsa SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coca Cola and Monster Beverage

The main advantage of trading using opposite Coca Cola and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 Coca Cola Femsa SAB 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.