Correlation Between Monster Beverage and Direct Line
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Direct Line 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 Direct Line 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 Direct Line Insurance, you can compare the effects of market volatilities on Monster Beverage and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Direct Line.
Diversification Opportunities for Monster Beverage and Direct Line
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Monster and Direct is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Monster Beverage i.e., Monster Beverage and Direct Line go up and down completely randomly.
Pair Corralation between Monster Beverage and Direct Line
Assuming the 90 days trading horizon Monster Beverage is expected to generate 10.92 times less return on investment than Direct Line. But when comparing it to its historical volatility, Monster Beverage Corp is 2.15 times less risky than Direct Line. It trades about 0.01 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 16,943 in Direct Line Insurance on November 28, 2024 and sell it today you would earn a total of 9,697 from holding Direct Line Insurance or generate 57.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.81% |
| Values | Daily Returns |
Monster Beverage Corp vs. Direct Line Insurance
Performance |
| Timeline |
| Monster Beverage Corp |
| Direct Line Insurance |
Monster Beverage and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Direct Line
The main advantage of trading using opposite Monster Beverage and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Monster Beverage vs. Pets at Home | Monster Beverage vs. Tata Steel Limited | Monster Beverage vs. Clean Power Hydrogen | Monster Beverage vs. Iron Mountain |
| Direct Line vs. Heavitree Brewery | Direct Line vs. Air Products Chemicals | Direct Line vs. Ryanair Holdings plc | Direct Line vs. Zoom Video Communications |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |