Correlation Between General Electric and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both General Electric 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 General Electric and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Electric and Monster Beverage, you can compare the effects of market volatilities on General Electric 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 General Electric with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Monster Beverage.
Diversification Opportunities for General Electric and Monster Beverage
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between General and Monster is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and General Electric 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 General Electric 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 has no effect on the direction of General Electric i.e., General Electric and Monster Beverage go up and down completely randomly.
Pair Corralation between General Electric and Monster Beverage
Assuming the 90 days trading horizon General Electric is expected to generate 1.58 times more return on investment than Monster Beverage. However, General Electric is 1.58 times more volatile than Monster Beverage. It trades about 0.09 of its potential returns per unit of risk. Monster Beverage is currently generating about 0.05 per unit of risk. If you would invest 58,203 in General Electric on September 14, 2024 and sell it today you would earn a total of 41,964 from holding General Electric or generate 72.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Electric vs. Monster Beverage
Performance |
| Timeline |
| General Electric |
| Monster Beverage |
General Electric and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Electric and Monster Beverage
The main advantage of trading using opposite General Electric and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric 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.| General Electric vs. Monster Beverage | General Electric vs. Southwest Airlines Co | General Electric vs. Iron Mountain Incorporated | General Electric vs. The Trade Desk |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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