Correlation Between Costco Wholesale and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale 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 Costco Wholesale and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Monster Beverage Corp, you can compare the effects of market volatilities on Costco Wholesale 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 Costco Wholesale with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Monster Beverage.
Diversification Opportunities for Costco Wholesale and Monster Beverage
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and Monster is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale i.e., Costco Wholesale and Monster Beverage go up and down completely randomly.
Pair Corralation between Costco Wholesale and Monster Beverage
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.2 times more return on investment than Monster Beverage. However, Costco Wholesale is 1.2 times more volatile than Monster Beverage Corp. It trades about 0.35 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.31 per unit of risk. If you would invest 1,872,000 in Costco Wholesale on November 8, 2024 and sell it today you would earn a total of 275,972 from holding Costco Wholesale or generate 14.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. Monster Beverage Corp
Performance |
| Timeline |
| Costco Wholesale |
| Monster Beverage Corp |
Costco Wholesale and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Monster Beverage
The main advantage of trading using opposite Costco Wholesale and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale 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.| Costco Wholesale vs. KB Home | Costco Wholesale vs. Verizon Communications | Costco Wholesale vs. McEwen Mining | Costco Wholesale vs. DXC Technology |
| Monster Beverage vs. Steel Dynamics | Monster Beverage vs. Verizon Communications | Monster Beverage vs. Taiwan Semiconductor Manufacturing | Monster Beverage vs. DXC Technology |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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