Correlation Between Monster Beverage and BT Group
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and BT Group 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 BT Group 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 BT Group Plc, you can compare the effects of market volatilities on Monster Beverage and BT Group 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 BT Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and BT Group.
Diversification Opportunities for Monster Beverage and BT Group
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Monster and BT-A is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and BT Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BT Group Plc 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 BT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BT Group Plc has no effect on the direction of Monster Beverage i.e., Monster Beverage and BT Group go up and down completely randomly.
Pair Corralation between Monster Beverage and BT Group
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 2.75 times more return on investment than BT Group. However, Monster Beverage is 2.75 times more volatile than BT Group Plc. It trades about 0.02 of its potential returns per unit of risk. BT Group Plc is currently generating about 0.03 per unit of risk. If you would invest 5,116 in Monster Beverage Corp on August 26, 2024 and sell it today you would earn a total of 306.00 from holding Monster Beverage Corp or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Monster Beverage Corp vs. BT Group Plc
Performance |
| Timeline |
| Monster Beverage Corp |
| BT Group Plc |
Monster Beverage and BT Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and BT Group
The main advantage of trading using opposite Monster Beverage and BT Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, BT Group 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 BT Group will offset losses from the drop in BT Group's 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 |
| BT Group vs. Scandic Hotels Group | BT Group vs. Futura Medical | BT Group vs. Solstad Offshore ASA | BT Group vs. Prosiebensat 1 Media |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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