Correlation Between Monster Beverage and MP Materials
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and MP Materials 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 MP Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage and MP Materials Corp, you can compare the effects of market volatilities on Monster Beverage and MP Materials 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 MP Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and MP Materials.
Diversification Opportunities for Monster Beverage and MP Materials
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and M2PM34 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and MP Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MP Materials Corp 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 MP Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MP Materials Corp has no effect on the direction of Monster Beverage i.e., Monster Beverage and MP Materials go up and down completely randomly.
Pair Corralation between Monster Beverage and MP Materials
Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.56 times more return on investment than MP Materials. However, Monster Beverage is 1.56 times more volatile than MP Materials Corp. It trades about 0.03 of its potential returns per unit of risk. MP Materials Corp is currently generating about -0.01 per unit of risk. If you would invest 3,242 in Monster Beverage on October 11, 2024 and sell it today you would earn a total of 705.00 from holding Monster Beverage or generate 21.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.38% |
| Values | Daily Returns |
Monster Beverage vs. MP Materials Corp
Performance |
| Timeline |
| Monster Beverage |
| MP Materials Corp |
Monster Beverage and MP Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and MP Materials
The main advantage of trading using opposite Monster Beverage and MP Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, MP Materials 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 MP Materials will offset losses from the drop in MP Materials' long position.| Monster Beverage vs. Citizens Financial Group, | Monster Beverage vs. Ameriprise Financial | Monster Beverage vs. Broadridge Financial Solutions, | Monster Beverage vs. Discover Financial Services |
| MP Materials vs. Taiwan Semiconductor Manufacturing | MP Materials vs. Apple Inc | MP Materials vs. Alibaba Group Holding | MP Materials vs. Banco Santander Chile |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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