Correlation Between Monster Beverage and Compass Group
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Compass 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 Compass 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 Compass Group PLC, you can compare the effects of market volatilities on Monster Beverage and Compass 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 Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Compass Group.
Diversification Opportunities for Monster Beverage and Compass Group
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monster and Compass is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass 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 Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Monster Beverage i.e., Monster Beverage and Compass Group go up and down completely randomly.
Pair Corralation between Monster Beverage and Compass Group
Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Compass Group. In addition to that, Monster Beverage is 1.57 times more volatile than Compass Group PLC. It trades about -0.01 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.12 per unit of volatility. If you would invest 217,273 in Compass Group PLC on September 1, 2024 and sell it today you would earn a total of 51,827 from holding Compass Group PLC or generate 23.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.95% |
| Values | Daily Returns |
Monster Beverage Corp vs. Compass Group PLC
Performance |
| Timeline |
| Monster Beverage Corp |
| Compass Group PLC |
Monster Beverage and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Compass Group
The main advantage of trading using opposite Monster Beverage and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Compass 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 Compass Group will offset losses from the drop in Compass Group's long position.| Monster Beverage vs. Uniper SE | Monster Beverage vs. Mulberry Group PLC | Monster Beverage vs. London Security Plc | Monster Beverage vs. Triad Group PLC |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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