Correlation Between New Oriental and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both New Oriental 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 New Oriental and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Oriental Education and Monster Beverage Corp, you can compare the effects of market volatilities on New Oriental 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 New Oriental with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Monster Beverage.
Diversification Opportunities for New Oriental and Monster Beverage
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between New and Monster is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education 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 New Oriental 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 New Oriental Education 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 New Oriental i.e., New Oriental and Monster Beverage go up and down completely randomly.
Pair Corralation between New Oriental and Monster Beverage
Assuming the 90 days trading horizon New Oriental is expected to generate 6.86 times less return on investment than Monster Beverage. In addition to that, New Oriental is 1.25 times more volatile than Monster Beverage Corp. It trades about 0.01 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.11 per unit of volatility. If you would invest 88,000 in Monster Beverage Corp on August 30, 2024 and sell it today you would earn a total of 25,500 from holding Monster Beverage Corp or generate 28.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Monster Beverage Corp
Performance |
| Timeline |
| New Oriental Education |
| Monster Beverage Corp |
New Oriental and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Monster Beverage
The main advantage of trading using opposite New Oriental and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental 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.| New Oriental vs. The Select Sector | New Oriental vs. SPDR Series Trust | New Oriental vs. FibroGen | New Oriental vs. iShares Trust |
| Monster Beverage vs. The Select Sector | Monster Beverage vs. SPDR Series Trust | Monster Beverage vs. FibroGen | Monster Beverage vs. iShares Trust |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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