Correlation Between Monster Beverage and Darden Restaurants
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants, you can compare the effects of market volatilities on Monster Beverage and Darden Restaurants 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 Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Darden Restaurants.
Diversification Opportunities for Monster Beverage and Darden Restaurants
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Monster and Darden is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Monster Beverage i.e., Monster Beverage and Darden Restaurants go up and down completely randomly.
Pair Corralation between Monster Beverage and Darden Restaurants
Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Darden Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.62 times less risky than Darden Restaurants. The stock trades about -0.06 of its potential returns per unit of risk. The Darden Restaurants is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 16,959 in Darden Restaurants on October 24, 2024 and sell it today you would earn a total of 1,538 from holding Darden Restaurants or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Monster Beverage Corp vs. Darden Restaurants
Performance |
| Timeline |
| Monster Beverage Corp |
| Darden Restaurants |
Monster Beverage and Darden Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Darden Restaurants
The main advantage of trading using opposite Monster Beverage and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Darden Restaurants 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 Darden Restaurants will offset losses from the drop in Darden Restaurants' long position.| Monster Beverage vs. OneSavings Bank PLC | Monster Beverage vs. Westlake Chemical Corp | Monster Beverage vs. Evolution Gaming Group | Monster Beverage vs. Bankers Investment Trust |
| Darden Restaurants vs. Monster Beverage Corp | Darden Restaurants vs. Target Healthcare REIT | Darden Restaurants vs. Cardinal Health | Darden Restaurants vs. Heavitree Brewery |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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