Correlation Between Monster Beverage and Naked Wines

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

Diversification Opportunities for Monster Beverage and Naked Wines

-0.49

Correlation Coefficient

Monster Beverage  Naked Wines

Very good diversification

The 3 months correlation between Monster and Naked is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Naked Wines go up and down completely randomly.

Pair Corralation between Monster Beverage and Naked Wines

Given the investment horizon of 90 days Monster Beverage is expected to generate 3.16 times less return on investment than Naked Wines. But when comparing it to its historical volatility, Monster Beverage Corp is 5.03 times less risky than Naked Wines. It trades about 0.01 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  520.00  in Naked Wines plc on August 20, 2024 and sell it today you would lose (249.00) from holding Naked Wines plc or give up 47.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Monster Beverage Corp  vs.  Naked Wines plc

Monster Beverage Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Naked Wines plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naked Wines plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and Naked Wines

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

The idea behind Monster Beverage Corp and Naked Wines 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.