Correlation Between Air Products and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Air Products 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 Air Products and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Monster Beverage Corp, you can compare the effects of market volatilities on Air Products 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 Air Products with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Monster Beverage.
Diversification Opportunities for Air Products and Monster Beverage
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Monster is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals 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 Air Products 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 Air Products Chemicals 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 Air Products i.e., Air Products and Monster Beverage go up and down completely randomly.
Pair Corralation between Air Products and Monster Beverage
Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 0.67 times more return on investment than Monster Beverage. However, Air Products Chemicals is 1.48 times less risky than Monster Beverage. It trades about -0.01 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.18 per unit of risk. If you would invest 31,186 in Air Products Chemicals on September 14, 2024 and sell it today you would lose (115.00) from holding Air Products Chemicals or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products Chemicals vs. Monster Beverage Corp
Performance |
| Timeline |
| Air Products Chemicals |
| Monster Beverage Corp |
Air Products and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Monster Beverage
The main advantage of trading using opposite Air Products and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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.| Air Products vs. Made Tech Group | Air Products vs. Datalogic | Air Products vs. Allianz Technology Trust | Air Products vs. Extra Space Storage |
| Monster Beverage vs. Inspiration Healthcare Group | Monster Beverage vs. Omega Healthcare Investors | Monster Beverage vs. Naturhouse Health SA | Monster Beverage vs. Optima Health plc |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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