Correlation Between Monster Beverage and APA
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and APA 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 APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage Corp and APA Corporation, you can compare the effects of market volatilities on Monster Beverage and APA 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 APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and APA.
Diversification Opportunities for Monster Beverage and APA
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Monster and APA is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation 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 Corp are associated (or correlated) with APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Monster Beverage i.e., Monster Beverage and APA go up and down completely randomly.
Pair Corralation between Monster Beverage and APA
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.82 times more return on investment than APA. However, Monster Beverage Corp is 1.21 times less risky than APA. It trades about 0.03 of its potential returns per unit of risk. APA Corporation is currently generating about -0.03 per unit of risk. If you would invest 95,800 in Monster Beverage Corp on September 12, 2024 and sell it today you would earn a total of 11,800 from holding Monster Beverage Corp or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Monster Beverage Corp vs. APA Corp.
Performance |
| Timeline |
| Monster Beverage Corp |
| APA Corporation |
Monster Beverage and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and APA
The main advantage of trading using opposite Monster Beverage and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, APA 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 APA will offset losses from the drop in APA's long position.| Monster Beverage vs. Martin Marietta Materials | Monster Beverage vs. Verizon Communications | Monster Beverage vs. Southern Copper | Monster Beverage vs. McEwen Mining |
| APA vs. Cognizant Technology Solutions | APA vs. Grupo Sports World | APA vs. United States Steel | APA vs. Samsung Electronics Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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