Correlation Between Monster Beverage and Sealed Air

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

Diversification Opportunities for Monster Beverage and Sealed Air

0.64

Correlation Coefficient

Monster Beverage  Sealed Air

Poor diversification

The 3 months correlation between Monster and Sealed is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Monster Beverage i.e., Monster Beverage and Sealed Air go up and down completely randomly.

Pair Corralation between Monster Beverage and Sealed Air

Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 1.02 times more return on investment than Sealed Air. However, Monster Beverage is 1.02 times more volatile than Sealed Air. It trades about 0.14 of its potential returns per unit of risk. Sealed Air is currently generating about 0.05 per unit of risk. If you would invest  4,830  in Monster Beverage Corp on August 31, 2024 and sell it today you would earn a total of  683.00  from holding Monster Beverage Corp or generate 14.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Monster Beverage Corp  vs.  Sealed Air

Monster Beverage Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Monster Beverage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sealed Air

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Monster Beverage and Sealed Air

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

The idea behind Monster Beverage Corp and Sealed Air 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.