Correlation Between Li Auto and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Li Auto 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 Li Auto and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Monster Beverage Corp, you can compare the effects of market volatilities on Li Auto 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 Li Auto with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Monster Beverage.
Diversification Opportunities for Li Auto and Monster Beverage
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Li Auto and Monster is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto 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 Li Auto 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 Li Auto 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 Li Auto i.e., Li Auto and Monster Beverage go up and down completely randomly.
Pair Corralation between Li Auto and Monster Beverage
Allowing for the 90-day total investment horizon Li Auto is expected to under-perform the Monster Beverage. In addition to that, Li Auto is 1.65 times more volatile than Monster Beverage Corp. It trades about -0.06 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.12 per unit of volatility. If you would invest 5,268 in Monster Beverage Corp on September 1, 2024 and sell it today you would earn a total of 245.00 from holding Monster Beverage Corp or generate 4.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Auto vs. Monster Beverage Corp
Performance |
| Timeline |
| Li Auto |
| Monster Beverage Corp |
Li Auto and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Monster Beverage
The main advantage of trading using opposite Li Auto and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto 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 Li Auto 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |