Correlation Between Monster Beverage and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Advance Auto 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 Monster Beverage and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage and Advance Auto Parts, you can compare the effects of market volatilities on Monster Beverage and Advance Auto 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 Monster Beverage with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Advance Auto.
Diversification Opportunities for Monster Beverage and Advance Auto
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monster and Advance is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and Monster Beverage 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 Monster Beverage are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Monster Beverage i.e., Monster Beverage and Advance Auto go up and down completely randomly.
Pair Corralation between Monster Beverage and Advance Auto
Assuming the 90 days trading horizon Monster Beverage is expected to generate 3.35 times less return on investment than Advance Auto. But when comparing it to its historical volatility, Monster Beverage is 1.74 times less risky than Advance Auto. It trades about 0.21 of its potential returns per unit of risk. Advance Auto Parts is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 1,309 in Advance Auto Parts on August 30, 2024 and sell it today you would earn a total of 335.00 from holding Advance Auto Parts or generate 25.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage vs. Advance Auto Parts
Performance |
| Timeline |
| Monster Beverage |
| Advance Auto Parts |
Monster Beverage and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Advance Auto
The main advantage of trading using opposite Monster Beverage and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| Monster Beverage vs. Unity Software | Monster Beverage vs. Extra Space Storage | Monster Beverage vs. Zoom Video Communications | Monster Beverage vs. NXP Semiconductors NV |
| Advance Auto vs. MAHLE Metal Leve | Advance Auto vs. Charter Communications | Advance Auto vs. Southwest Airlines Co | Advance Auto vs. G2D Investments |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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