Correlation Between Monster Beverage and Grupo Financiero

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

Diversification Opportunities for Monster Beverage and Grupo Financiero

0.03

Correlation Coefficient

Monster Beverage  Grupo Financiero

Significant diversification

The 3 months correlation between Monster and Grupo is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Grupo Financiero Banorte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Banorte 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Banorte has no effect on the direction of Monster Beverage i.e., Monster Beverage and Grupo Financiero go up and down completely randomly.

Pair Corralation between Monster Beverage and Grupo Financiero

Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.84 times more return on investment than Grupo Financiero. However, Monster Beverage Corp is 1.19 times less risky than Grupo Financiero. It trades about 0.18 of its potential returns per unit of risk. Grupo Financiero Banorte is currently generating about 0.0 per unit of risk. If you would invest  95,500  in Monster Beverage Corp on September 4, 2024 and sell it today you would earn a total of  18,000  from holding Monster Beverage Corp or generate 18.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Monster Beverage Corp  vs.  Grupo Financiero Banorte

Monster Beverage Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Monster Beverage showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Banorte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Banorte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Monster Beverage and Grupo Financiero

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

The idea behind Monster Beverage Corp and Grupo Financiero Banorte 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 CEOs Directory module to screen CEOs from public companies around the world.