Correlation Between Monster Beverage and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Eastman Chemical 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 Eastman Chemical 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 Eastman Chemical Co, you can compare the effects of market volatilities on Monster Beverage and Eastman Chemical 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 Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Eastman Chemical.
Diversification Opportunities for Monster Beverage and Eastman Chemical
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Monster and Eastman is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Monster Beverage i.e., Monster Beverage and Eastman Chemical go up and down completely randomly.
Pair Corralation between Monster Beverage and Eastman Chemical
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 1.2 times more return on investment than Eastman Chemical. However, Monster Beverage is 1.2 times more volatile than Eastman Chemical Co. It trades about 0.15 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about -0.06 per unit of risk. If you would invest 5,030 in Monster Beverage Corp on September 3, 2024 and sell it today you would earn a total of 507.00 from holding Monster Beverage Corp or generate 10.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Monster Beverage Corp vs. Eastman Chemical Co
Performance |
| Timeline |
| Monster Beverage Corp |
| Eastman Chemical |
Monster Beverage and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Eastman Chemical
The main advantage of trading using opposite Monster Beverage and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Monster Beverage vs. Catalyst Media Group | Monster Beverage vs. CATLIN GROUP | Monster Beverage vs. Magnora ASA | Monster Beverage vs. RTW Venture Fund |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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