Correlation Between Monster Beverage and Walmart
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage and Walmart, you can compare the effects of market volatilities on Monster Beverage and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Walmart.
Diversification Opportunities for Monster Beverage and Walmart
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monster and Walmart is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Monster Beverage i.e., Monster Beverage and Walmart go up and down completely randomly.
Pair Corralation between Monster Beverage and Walmart
Assuming the 90 days trading horizon Monster Beverage is expected to generate 2.24 times less return on investment than Walmart. In addition to that, Monster Beverage is 1.08 times more volatile than Walmart. It trades about 0.23 of its total potential returns per unit of risk. Walmart is currently generating about 0.54 per unit of volatility. If you would invest 2,967 in Walmart on September 4, 2024 and sell it today you would earn a total of 553.00 from holding Walmart or generate 18.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage vs. Walmart
Performance |
| Timeline |
| Monster Beverage |
| Walmart |
Monster Beverage and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Walmart
The main advantage of trading using opposite Monster Beverage and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| Monster Beverage vs. The Coca Cola | Monster Beverage vs. Unipar Carbocloro SA | Monster Beverage vs. Waste Management | Monster Beverage vs. Apartment Investment and |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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