Correlation Between American Airlines and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both American Airlines 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 American Airlines and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Monster Beverage Corp, you can compare the effects of market volatilities on American Airlines 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 American Airlines with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Monster Beverage.
Diversification Opportunities for American Airlines and Monster Beverage
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Monster is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group 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 American Airlines 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 American Airlines Group 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 American Airlines i.e., American Airlines and Monster Beverage go up and down completely randomly.
Pair Corralation between American Airlines and Monster Beverage
Considering the 90-day investment horizon American Airlines Group is expected to generate 1.5 times more return on investment than Monster Beverage. However, American Airlines is 1.5 times more volatile than Monster Beverage Corp. It trades about 0.23 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.07 per unit of risk. If you would invest 1,156 in American Airlines Group on August 28, 2024 and sell it today you would earn a total of 308.00 from holding American Airlines Group or generate 26.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Monster Beverage Corp
Performance |
| Timeline |
| American Airlines |
| Monster Beverage Corp |
American Airlines and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Monster Beverage
The main advantage of trading using opposite American Airlines and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines 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.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| Monster Beverage vs. Vita Coco | Monster Beverage vs. PepsiCo | Monster Beverage vs. The Coca Cola | Monster Beverage vs. Coca Cola Femsa SAB |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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