Correlation Between Monster Beverage and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines Co, you can compare the effects of market volatilities on Monster Beverage and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Southwest Airlines.
Diversification Opportunities for Monster Beverage and Southwest Airlines
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Southwest is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Monster Beverage i.e., Monster Beverage and Southwest Airlines go up and down completely randomly.
Pair Corralation between Monster Beverage and Southwest Airlines
Assuming the 90 days trading horizon Monster Beverage is expected to generate 3.32 times less return on investment than Southwest Airlines. In addition to that, Monster Beverage is 1.02 times more volatile than Southwest Airlines Co. It trades about 0.08 of its total potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.27 per unit of volatility. If you would invest 3,023 in Southwest Airlines Co on September 4, 2024 and sell it today you would earn a total of 294.00 from holding Southwest Airlines Co or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Southwest Airlines Co
Performance |
| Timeline |
| Monster Beverage Corp |
| Southwest Airlines |
Monster Beverage and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Southwest Airlines
The main advantage of trading using opposite Monster Beverage and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Hyundai Motor | Monster Beverage vs. Toyota Motor Corp |
| Southwest Airlines vs. Samsung Electronics Co | Southwest Airlines vs. Samsung Electronics Co | Southwest Airlines vs. Hyundai Motor | Southwest Airlines vs. Toyota Motor Corp |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |