Correlation Between Monster Beverage and New Oriental
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and New Oriental 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 New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage and New Oriental Education, you can compare the effects of market volatilities on Monster Beverage and New Oriental 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 New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and New Oriental.
Diversification Opportunities for Monster Beverage and New Oriental
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Monster and New is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Monster Beverage i.e., Monster Beverage and New Oriental go up and down completely randomly.
Pair Corralation between Monster Beverage and New Oriental
Assuming the 90 days trading horizon Monster Beverage is expected to generate 0.28 times more return on investment than New Oriental. However, Monster Beverage is 3.56 times less risky than New Oriental. It trades about -0.25 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.26 per unit of risk. If you would invest 4,056 in Monster Beverage on October 28, 2024 and sell it today you would lose (340.00) from holding Monster Beverage or give up 8.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage vs. New Oriental Education
Performance |
| Timeline |
| Monster Beverage |
| New Oriental Education |
Monster Beverage and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and New Oriental
The main advantage of trading using opposite Monster Beverage and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, New Oriental 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 New Oriental will offset losses from the drop in New Oriental's long position.| Monster Beverage vs. The Hartford Financial | Monster Beverage vs. Microchip Technology Incorporated | Monster Beverage vs. Zoom Video Communications | Monster Beverage vs. DXC Technology |
| New Oriental vs. Academy Sports and | New Oriental vs. Waste Management | New Oriental vs. PENN Entertainment, | New Oriental vs. Live Nation Entertainment, |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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