Correlation Between Monster Beverage and Diamond Estates

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

Diversification Opportunities for Monster Beverage and Diamond Estates

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Monster and Diamond is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Monster Beverage i.e., Monster Beverage and Diamond Estates go up and down completely randomly.

Pair Corralation between Monster Beverage and Diamond Estates

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 0.25 times more return on investment than Diamond Estates. However, Monster Beverage Corp is 3.93 times less risky than Diamond Estates. It trades about -0.04 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.1 per unit of risk. 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 Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy96.92%
ValuesDaily Returns

Monster Beverage Corp  vs.  Diamond Estates Wines

 Performance 
       Timeline  
Monster Beverage Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
Diamond Estates Wines 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Monster Beverage and Diamond Estates Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Monster Beverage and Diamond Estates

The main advantage of trading using opposite Monster Beverage and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' long position.
The idea behind Monster Beverage Corp and Diamond Estates Wines 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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