Correlation Between Home Depot and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Home Depot and Monster Beverage 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 Home Depot and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Monster Beverage Corp, you can compare the effects of market volatilities on Home Depot and Monster Beverage 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 Home Depot with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Monster Beverage.
Diversification Opportunities for Home Depot and Monster Beverage
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Monster is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Home Depot 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 Home Depot are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Home Depot i.e., Home Depot and Monster Beverage go up and down completely randomly.
Pair Corralation between Home Depot and Monster Beverage
Assuming the 90 days trading horizon Home Depot is expected to generate 0.13 times more return on investment than Monster Beverage. However, Home Depot is 7.92 times less risky than Monster Beverage. It trades about 0.11 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.01 per unit of risk. If you would invest 16,594 in Home Depot on August 26, 2024 and sell it today you would earn a total of 1,263 from holding Home Depot or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.26% |
| Values | Daily Returns |
Home Depot vs. Monster Beverage Corp
Performance |
| Timeline |
| Home Depot |
| Monster Beverage Corp |
Home Depot and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Monster Beverage
The main advantage of trading using opposite Home Depot and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Monster Beverage 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 Monster Beverage will offset losses from the drop in Monster Beverage's long position.| Home Depot vs. Walmart | Home Depot vs. Volkswagen AG | Home Depot vs. Volkswagen AG Non Vtg | Home Depot vs. Compass Group PLC |
| Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Hyundai Motor | Monster Beverage 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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