Correlation Between Lucid and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Lucid 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 Lucid and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucid Group and Monster Beverage Corp, you can compare the effects of market volatilities on Lucid 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 Lucid with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and Monster Beverage.
Diversification Opportunities for Lucid and Monster Beverage
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lucid and Monster is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lucid 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 Lucid 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 Lucid 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 Lucid i.e., Lucid and Monster Beverage go up and down completely randomly.
Pair Corralation between Lucid and Monster Beverage
Given the investment horizon of 90 days Lucid Group is expected to under-perform the Monster Beverage. In addition to that, Lucid is 2.92 times more volatile than Monster Beverage Corp. It trades about -0.02 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.04 per unit of volatility. If you would invest 5,189 in Monster Beverage Corp on September 1, 2024 and sell it today you would earn a total of 324.00 from holding Monster Beverage Corp or generate 6.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lucid Group vs. Monster Beverage Corp
Performance |
| Timeline |
| Lucid Group |
| Monster Beverage Corp |
Lucid and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucid and Monster Beverage
The main advantage of trading using opposite Lucid and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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.The idea behind Lucid Group and Monster Beverage Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Monster Beverage vs. Coca Cola Femsa SAB | Monster Beverage vs. National Beverage Corp | Monster Beverage vs. Embotelladora Andina SA |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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