Correlation Between Capital One and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Capital One 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 Capital One and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Monster Beverage Corp, you can compare the effects of market volatilities on Capital One 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 Capital One with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Monster Beverage.
Diversification Opportunities for Capital One and Monster Beverage
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Capital and Monster is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial 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 Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and Monster Beverage go up and down completely randomly.
Pair Corralation between Capital One and Monster Beverage
Assuming the 90 days trading horizon Capital One Financial is expected to generate 1.49 times more return on investment than Monster Beverage. However, Capital One is 1.49 times more volatile than Monster Beverage Corp. It trades about 0.2 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.04 per unit of risk. If you would invest 267,115 in Capital One Financial on November 2, 2024 and sell it today you would earn a total of 151,197 from holding Capital One Financial or generate 56.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Monster Beverage Corp
Performance |
| Timeline |
| Capital One Financial |
| Monster Beverage Corp |
Capital One and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Monster Beverage
The main advantage of trading using opposite Capital One and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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.| Capital One vs. FibraHotel | Capital One vs. Grupo Hotelero Santa | Capital One vs. Taiwan Semiconductor Manufacturing | Capital One vs. Deutsche Bank Aktiengesellschaft |
| Monster Beverage vs. GMxico Transportes SAB | Monster Beverage vs. Southern Copper | Monster Beverage vs. Verizon Communications | Monster Beverage vs. United States Steel |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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