Correlation Between Monster Beverage and Bread Financial
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Bread Financial 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 Bread Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage and Bread Financial Holdings, you can compare the effects of market volatilities on Monster Beverage and Bread Financial 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 Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Bread Financial.
Diversification Opportunities for Monster Beverage and Bread Financial
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Monster and Bread is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings 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 Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Monster Beverage i.e., Monster Beverage and Bread Financial go up and down completely randomly.
Pair Corralation between Monster Beverage and Bread Financial
Assuming the 90 days trading horizon Monster Beverage is expected to generate 3.0 times less return on investment than Bread Financial. But when comparing it to its historical volatility, Monster Beverage is 2.91 times less risky than Bread Financial. It trades about 0.21 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 7,347 in Bread Financial Holdings on September 2, 2024 and sell it today you would earn a total of 1,539 from holding Bread Financial Holdings or generate 20.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage vs. Bread Financial Holdings
Performance |
| Timeline |
| Monster Beverage |
| Bread Financial Holdings |
Monster Beverage and Bread Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Bread Financial
The main advantage of trading using opposite Monster Beverage and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Bread Financial 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 Bread Financial will offset losses from the drop in Bread Financial's long position.| Monster Beverage vs. G2D Investments | Monster Beverage vs. Healthpeak Properties | Monster Beverage vs. Paycom Software | Monster Beverage vs. Costco Wholesale |
| Bread Financial vs. Multilaser Industrial SA | Bread Financial vs. Technos SA | Bread Financial vs. Uber Technologies | Bread Financial vs. Take Two Interactive Software |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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